The Spring Budget had little in it to get retailers excited – nor to put them at ease. While Chancellor Hunt did announce, via the Office of Budget Responsibility (OBR), that the UK won’t enter a technical recession this year – because while the economy is shrinking, it is shrinking because growth is slowing, rather than contracting – things are still quite dicey.
Raises in corporation tax, unless you’re a business that heavily invests in R&D, are unlikely to offer much succour to your average retailer, while a push to get the over 50s back to work also looks somewhat wrong-headed: many left work because they wanted to and won’t be returning, while many long-term sick are too ill to do so.
Even the continued cap on fuel prices for consumers will have only a limited impact on business.
While it didn’t send the stock market and the pound into free fall a la Kwasi ‘Kami-Kwasi’ Kwartang’s mini budget during the (very) short-lived tenure of Liz Truss, it hasn’t filled industry of any stripe with much joy.
One can only hope that it has pepped up consumers. Continued energy bill relief, the receding threat of recession and a few other give aways, such as much needed childcare benefits, may not deliver much into people’s pockets, but if it delivers hope into their hearts then it could well yet help out the retail sector.
While there are definitive cost-of-living drags on shopper spending, some of the downturn in consumer activity is down to perception. If you believe there’s a monster in your wardrobe, you hide under the covers. Where there might be cause for hope is that, while many are hiding in under their eiderdowns, spending across some sectors hasn’t been as bad as predicted. Data from the Office for National Statistics (ONS) shows that retail sales grew by 0.5% in January, with online sales up 2%. This trend appears to be continuing, for some retailers at least, across February and into March.
John Lewis’ results make sobering reading, but there is cause for hope elsewhere. Fashion giants Inditex and H&M, for example, have both had record years and quarters respectively, with figures for UK operations of each not too shabby at all.
We may not be out of the woods – or the duvet – yet, but the monster in the wardrobe may not be as frightening as first thought. We teeter on an economic knife edge, but a budget that offers even a crumb of comfort to consumer confidence may yet tickle shoppers back to buying.
This would be good news for many, especially the consumer electronics sector, which has seen sales slow dramatically and has seen the sector flooded with unsold stock and returns. Two thirds (66%) currently have too many products, compared to just 10% that are under-stocked as consumers cut spending in the face of rising bills. Just over half (51%) of those surveyed expressed that returns were a challenge and of those who were having issues, 70% said this impact was ‘significant’.
Returners, however, may not be the problem many retailers fear them to be. Clamp downs on serial returners – especially in fashion – may not be a good idea. Many shoppers who are themselves serial returns actually consider themselves to be high spending and very loyal customers, with the ability to buy many, keep one and return the rest seen as something that attracts shoppers to a brand.
At a time when loyalty and repeat purchasing are now more important than ever, may be the time has come to rethink the role of returns? It certainly offers more hope than yesterday’s budget.