Gloomy outlook for retailers as continuing fall in high street sales forecast

Aug 27 2008 by Alex Turner, Liverpool Daily Post

IT has been a torrid time for retailers, with the list of companies in trouble lengthening by the week.

Wrapit, Beds Direct, Floors-2-go, ScS Upholstery, MK One, Ethel Austin, FreshXpress, Select Retail, The Works and Dolcis are just some of the major retailers that have been forced to call in the administrators in 2008.

But despite the latest retail sales figures from the Office of National Statistics, which showed a 0.8% rise for July, increasingly the expectation is for problems on the high street to continue well into next year.

In saying “trading is tough and it’s going to get even tougher next year”, retail analyst Nick Bubb is not a lone voice.

The Centre for Retail Research, led by Prof Joshua Bamfield, is forecasting retail sales will fall by up to 1.4%, with household goods and hardware items to be particularly badly hit.

The lone bright spot will be internet sales, which it expects to continue to boom, increasing by a cumulative 55% per year.

He said: “Retailing will not get out of trouble until our economic woes start to ease.

“We feel that unless there is a sudden deterioration this recession will last two years.

“However, we feel its impact will be more severe and that there is little chance of a sizeable upturn in the latter part of 2009.

“We are very optimistic about 2010.”

However until then, a tricky 12 to 18 month period is expected for retailers, which could see a period of consolidation and downscaling after expansion in the boom of recent years. “Successful business areas will include mothers and babies, food supermarkets, electronic games, recreational wear and cycling,” he said.

“Good quality ethical retailers should do reasonably well if what they do is related to what people prize, they tell a good story, and they are located in a reasonable shopping area.

“Middle-of-the-road stores and franchisees will have a problem. Too expensive and uninteresting for the poor and the strugglers, their clientele will become increasingly elderly. More prosperous consumers will also avoid them in favour of a combination of more aggressive discounters and quality middle class shopping.

“This could be the time when multiple retailers with hundreds of stores decide to close 20% to 30% of their branches to concentrate on the internet and more successful outlets.”