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The Future of The EU and Retail

Hard Times Ahead?

A combination of changing demographics, economic migrants and a switch to digital may leave
many retailers struggling in the future, reports Penelope Ody

While Brexit dominates UK headlines, elsewhere in Europe there are very different priorities. For some, stemming the flow of economic migrants is key. And while youth unemployment is parts of southern Europe has been falling, it is still around 33% in both Spain and Italy. Generational change is also significant as generation X and millennials, with their very different attitudes to consumerism and green issues, begin to replace baby boomers and start to dominate the shopper mix.

So how will all this affect Europe’s retailers? Some indications are becoming all-too apparent, as the move to online sales hits the high street with shop closures and company voluntary arrangements. The Centre for Retail Research (CRR) predicts that the total number of shops closing in the UK between 2017 and 2022 will reach more than 31,000. Long-established companies, such as House of Fraser and New Look, have very public problems, while Europe’s largest retailer, Carrefour, has announced plans to cut jobs and costs, boost ecommerce and expand its Chinese operations in an attempt to improve profits and revenues, Carrefour’s French hypermarkets are already into negative territory.

For millennials, digital is a way of life and many would much prefer to shop via a mobile app while watching Netflix than enter a real-world store. Generation X – often sandwiched between care for elderly parents and financing their cash-strapped offspring – prefer experiential holidays in the sun to acquiring more ‘stuff’ for their already overcrowded homes.

Generation x prefers experiential holidays to acquiring more stuff for their overcrowded homes

For Europe’s retailers ,the future is challenging. With high youth unemployment in some regions and millennials struggling to buy or rent a home of their own in others, this usually high-spending cohort is far less profligate in its spending than Generation X was at the same age. At the same time, economic migrants are often more concerned with sending money home to relatives than indulging in a spending spree. This pool of willing low-wage workers also does little to increase the take-home pay for others and even in affluent Germany, around 17% of the population is living below the poverty line.

To limited finances, add a fondness for digital and the future for many high streets becomes increasingly problematic. For some retailers – as is already happening – there will be retrenchment solely to prime shopping locations, with investment switched to digital offerings. In the first six months of 2018, the CRR calculates that more than 21,000 retail jobs have already been lost in the UK. Fortunately, this country suffers from a shortage of labour, with unemployment at its lowest levels, but the same will not be true for redundant Carrefour workers in areas of existing high unemployment. The resulting downturn in consumer spending will be another blow for many retailers in the months ahead.

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