How will retailers vote in the General Election

The snap General Election took everyone by surprise, not least High Street retailers.

Whilst a strong recovery was noticed on the Britain’s High Street following, the Brexit vote back in June 2016, the first three months of 2017 have seen sales fall by 1.4%, says the ONS. However, April saw a splurge online and on the High Street with sales increase of 2.3%.

The main worry for retailers seems to be Business rates, the European single market and immigration.

Continued access to the single market is obviously essential for retailers and other businesses alike. Business Rates probably tops that as businesses such as Waterstones, Boux Avenue, Carpet Right and Debenhams all call for rates reform.

The BRC took the step to write to Phillip Hammond and try and persuade him that without ‘fundamental reform’ businesses willl see a doubling of their bills.

The British Chamber of Commerce also waded in with their concerns adding that 1 in small firms rate it as their biggest concerns

Adam Marshall, director-general of the BCC, said:”…hammering firms with sky-high costs before they turn over a single pound. This undermines business investment, which in 2016, fell for the first time in seven years.”

For a variety of different reasons, immigration is also weighing heavily on the minds of retailers.

Having access to a skilled workforce is critical for all business and in some sectors that will include immigrants, without it their businesses will cease to trade.

By contrast other businesses consider this free-movement of people a threat to their trading.

A word about uncertainty

Brexit and the General Election bring with them a fair amount of uncertainty and with the Brexit negotiations taking a least 2 years – I think it’s fair to say we shall have lots of uncertainty still to come.

When the British public are uncertain about their future, the first thing they do is stop spending.

Is the buying cycle changing?

Recent research by Kantar WorldPanel is suggesting that consumer buying habits have changed.

It seems that seasonal buying has changed and that consumer are happy to hold off before making their essential purchases. This delay has been down to consumers picking their moment to get the best price.

This makes sense to me. Back in the day I recall my mother marching me off to the local shoe shop at the end of summer for new school shoes. The only choice available was whatever was about a dozen shops on the high street.

Today, however, competition has bloomed. Type in “School Shoes” into Google and there are 33 million websites – that’s a very long high street.

With this extra competition, comes choice and different pricing strategies.

Just to add extra weight to this argument, I vividly recall the Chairman of the John Lewis Group being interviewed on radio 4. He noted that Christmas now commences on Black Friday and consumer spending for price sensitive customers revolves round these promotion events.

This means customers will hold off buying until they are happy, this will include buying Easter gifts after Easter for 2018!

What does this means for retailers? Businesses stuck in a rigid, seasonal buying cycle may find themselves with additional stock they need to discount more often than they like.

Discount or not to discount that is the question

So, as the shift moves away from seasonal buying and competition increases, retailers have a difficult question to answer – Do I hold my price and risk not shifting stock or drop my price and lose profit?

In the clothing market a report concluded approximately “90% of the trading weeks in 2016, more than half the had some sort of sale going on”.

With this level of frequency is hardly surprising that customers pick their moment.

Let us know your thoughts.