Economic confidence rising but lack of disposable income tempers spending, KPMG/Ipsos Retail Think Tank finds

Late surge in December shopping

Late surge in December shopping

The health of UK retail remained static in Quarter 4 of 2013, as a slight increase in demand – assisted by a very late spending surge in the festive period – was offset by margin factors, according to the latest KPMG/Ipsos Retail Think Tank quarterly survey.

Gross margins again came under pressure as retailers felt the need to run more planned and unplanned promotions, researchers found.

Cost factors over the quarter were again largely neutral and are likely to remain neutral in Q1 of 2014.

The health of UK retail is expected to remain flat in Q1, despite further signs of economic recovery and improved consumer confidence.

The KPMG/Ipsos Retail Think Tank (RTT) described the latest retail sector performance as “disappointing” , given that the previous quarter (Q3) had shown some signs of improvement. As a consequence, the RTT’s Retail Health Index remains at 79 points and is expected to be the same come the end of Q1.

Of the three key drivers of retail health – demand, margin and cost – demand was slightly up in Q4, helped by a late surge in shopping in December. However, the benefits were offset by a squeeze on margins as retailers again felt intense pressure to discount with both planned and unplanned sales promotions. Cost factors over the period were considered largely neutral, as they had been in Q3.

Notably, online sales were high in December, the busiest month for most retailers in the quarter, as internet purchasing once again proved popular among consumers happier to shop from their tablets, smartphones and PCs.  

Overall, footfall was up like-for-like in December but only marginally compared to last year. The retailers faring best of all appear to be those with carefully planned and complementary multi-channel offerings, said researchers.