One of the big mysteries of the recession has been just how resilient retail spending has been. Contrary to expectations, we have not witnessed a dramatic slump in spending which seemed like a foregone conclusion at the start of downturn. In fact, the hard data suggests spending has actually increased.
According to National Statistics, the value of retail sales, excluding automotive fuel, rose by 2.8 per cent during the first six months of the year, on the back of a 1.9 per cent increase in 2009. Now while some analysts have questioned the validity of these figures, they have largely been mirrored by trade data.
For example, our own survey across mid-market stores suggests like-for-like sales, with the exception of January, have advanced every month this year. So it seems that, despite the newspapers being full of talk a double-dip recession, consumers are continuing to spend relatively heavily.
But can this spending spree really last? After all, isn’t the UK consumer up to their eyes in debt and worried about losing their jobs? Come January when VAT increases won’t everyone cut back on spending?
Well, to a certain extent we have been here before. This time last year these same points were being made and yet consumers continued to spend. Yes, there is a significant degree of consumer uncertainty at the moment, but the British consumer is a curious beast and rarely acts entirely logically. Having been written-off countless times before they repeatedly surprise by demonstrating just how resilient they are.
I put a lot of this down to the fact that shopping really has become ingrained into society as our favourite pastime. The UK consumer still basically wants to spend.
There are some concerns about how the consumer will react to higher prices arising from recent commodity increases and higher VAT come the New Year. However, retailers in this country are some of the best run in the world. I believe most will actively manage this situation through clever promotions, smart buying and brilliant marketing. The right product in the right environment will continue to sell. That’s why, as long as interest rates stay low, we should see spending continuing to hold-up.
Of course, whilst none of this is to deny that conditions will probably become tougher over the next six-nine months, retail is still fundamentally a growth industry. Add in the fact that many retailers in this country are the world’s best run, and you can see why I am optimistic about the future.