The challenges that retailers face leading up to Christmas 2014 – Part 1

Christmas charityChristmas is traditionally a time when the consumer market usually explodes. But with family budgets being tighter than ever this year amidst the spiraling costs of living, retailers face bigger challenges than ever to compete for a share of the Christmas shopper’s purse.

The first of two reports – Conventional High Street shopping

This is the first of two special reports that Supply Chain Station are running on the race for the consumer’s custom and the challenges that retailers face to maintain and try and increase market share. The second article will be published next week.

The battle on the High Street in terms of the conventional shopping scene is hotting-up nicely as the run-up to Christmas gets seriously underway. The economy in the UK has now stabilized and is growing modestly. High Street retailers are sharpening their knives according to a recent report by the CBI (Confederation of British Industry) as family budgets are being squeezed by current and expected cost of living increases.

Fierce price competition ahead

A survey carried out across 130 retail businesses shows that retailers in general expect trading conditions to improve over the next three to four months, based on this year’s modest improvements. But on the back of the Black Friday sales in the USA, retailers are bracing themselves for a bout of fierce price competition; fiercer than ever before at this time of the year.

A demanding year for the retail industry

A spokesman for the CBI, (who is also ASDA’s chief food merchandising officer – ASDA being one of the U.K.’s busiest supermarkets), Barry Williams, is reported as saying, “There is no secret to the fact that it’s been a very tough year for the retail industry. But shopkeepers haven’t been soft pedaling in terms of getting shoppers through their doors. A fact which is borne out by the lowest essential item inflation we’ve seen in five years, and the growing importance being given to online sales.”

The strengthening of homeware sales

The CBI report indicates that many retailers have been winning some of the battles in what has proved to be one of the most challenging years in the retail market. There has been a strong growth in sales among grocers and a number of retailers selling carpets, DIY kits, and furniture, in the three months leading up to November.

Black Friday type sales may be the key

The pressure on the UK consumer has lightened slightly with indications from the Bank of England that interest rates will remain as they are in the near future. It will undoubtedly harden the resolve of many retailers to increase price pressure by adopting US style Black Friday sales promotions. It should put a smile back on the face of all consumers, and with so many promotional offers vying for the pound in their purse, hopefully, promote a Christmas sales bonanza.

Fashion industry facing tough times

The British Retail Consortium (BRC) is however, warning that a number of retailers who are under resourced could well find themselves in trouble. The fashion industry in particular, are expected to face tough times as figures from Visa Europe report that the spend on clothing and footwear fell two months in a row to the end of October. A good Christmas shopping spree would help to top-up the coffers in anticipation of what is being predicted will be a tough trading start to 2015. The BRC predicted it could mirror the tough start to 2012/13 when we saw eight major retailers fail.

Sink or swim

The challenge facing retailer’s boils down to getting the blend right between slashing prices, increasing takings at the till, and making enough profit. In under pressure industries such as the fashion industry, getting it right may be the difference between swimming and sinking.

Next week we cast the spotlight on online retailing

Retailers also need to be paying particular attention to the ever-growing demand for online shopping. It’s a serious marketplace and one which if not properly managed and co-ordinated can harm conventional sales and also fail to maximize online revenue. This is something that we’ll be taking a closer look at in the 2nd report (next week) on the challenges facing the retail industry during the run-up to Christmas.

Should shoppers look at the bigger picture? What price bargain shopping if the retailer can’t survive? Have your say at the comments section below.

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