UK retail sales volumes fall showing growing importance of exporting for the sector
15 June 2017
Retail sales volumes have taken a dive in the UK following fears that higher import costs are now hitting the pockets of UK consumers. They fell by 1.2% in May – worse than expected – falling to their lowest level since 2013, and deeper than the 0.8% month-on-month decline analysts predicted. Retail sales are only 0.9% higher than a year ago – again as low a level of growth as we’ve seen since 2013.
The weakening pound’s effect on import prices is the major factor behind this. The ONS have said that average store prices went up 2.8%, tracking the overall inflation rate. With wage growth still stalling and banks indicating that they could hold back on the supply of unsecured credit, the outlook is not too strong for UK consumers generally.
Samuel Tombs, the chief UK economist at Pantheon Macroeconomics, told the Guardian:
“As a result, we expect quarter-on-quarter growth in households’ real spending to average just 0.2% in the remaining three quarters of 2017, ensuring that the overall economy continues to struggle.”
Important for UK businesses to reach new customers
The flipside to the rising import costs caused by a weaker currency is that UK goods are more affordable overseas. With sales by UK retail companies to UK consumers looking likely to stall or decrease, it’s more important than ever that these businesses look overseas for new customers with deeper pockets.
Exporting to multiple markets has always been a great way to diversify the risk – if you sell to just one market there is always the risk that a weakened economy in that market will weaken sales. Of course import costs will continue to have an effect on manufacture and supply chain costs for many UK retail businesses. But, though there are costs in exporting, with appropriate planning and a decent strategy it can be a cost-effective way of generating new revenue streams as income falls in different markets.
As the UK market stalls, other markets around the world are growing with consumers becoming better able to buy cheapening UK products. Consumers with more money than they had before are, of course, the perfect customers.
Not all bad
Certain sections of the retail sector haven’t fared so badly. Clothing and shoe stores have performed well, partly due to warmer weather, and as recently as April there was an 8-month high in sales. Furniture sellers were among the worst hit but budget food retailers appear to have done well indicating that shoppers are looking to move spending towards essential items and food.
Given the international demand for British products is often said to be based around luxury and quality, it may be the case that businesses selling such goods would be best served looking at their exporting strategy.
Source: UK retail sales dive as consumers feel Brexit inflation pinch - The Guardian