Retail growth to slow down in 2017

The KPMG/Ipsos Retail Think Tank are forecasting a slow, near stagnant retail growth of just 0.5 percent in 2017. The retail think tank, which provides an authoritative and trusted window on what is currently happening in retail, cite uncertain political climates as one key influencer on retail health.

Tim Denison, director of retail performance at Ipsos Retail Intelligence, suggested that “politics had finally caught up with retailing” in the way in which shoppers and voters are both pushing against the establishment. For years now, shoppers have been voting with their feet, punishing the ‘safe and established’ retailers that became disconnected from their customer, bringing them to their knees or, worse, sending them to the cemetery. In 2016, the same thing happened in mainstream politics: politicians experienced first-hand the damage that public disillusionment can inflict on the establishment.”

The outcome of Brexit has not yet been felt

Last month retail sales growth accelerated in the year to December, with volumes rising at the fastest pace since September 2015 according to figures from the CBI Distributive Monthly.

Ben Jones, CBI Principal Economist, said:“It’s encouraging to see retailers reporting another month of healthy sales growth leading up to the festive season, which rounds off a fairly solid quarter.“While we still expect to see decent growth in the near term, the pressures on retail activity are likely to increase during 2017, as the impact of sterling’s depreciation feeds through.With higher inflation beginning to weigh on households’ purchasing power, consumption patterns are likely to shift, creating winners and losers across the retail landscape.”

According to the Retail Bulletin the think tank members all noted how UK shoppers have been relatively relaxed until now about the results of the Brexit referendum, with consumer spending on the rise over the final months of 2016. However, they warned that this may change as Brexit negotiations and the changing political landscape across Europe crystallise.

Whilst consumers have benefited from deflated prices, Paul Martin of KPMG said: “We will see inflation rise, potentially up to 3 percent by the end of the year and in conjunction with continued foreign exchange fluctuations, prices will rise.”

The think tank also stressed that 2017 will bring several reasons for optimism. Some members regarded the upcoming challenges as an opportunity for retailers to be more agile in the ever-changing external environment. The key, according to Martin, is to focus on “controlling the controllable.”

According to the Business of Fashion and McKinsey & Company report: The State of Fashion in 2017, the number one trend that will define the fashion landscape this year is accepting "volatility is the new normal. Geopolitical instability, terrorism, Brexit, and stalled trade deals will all increase a pervasive sense of uncertainty in the global economy.

Politics aside, the average shopper is more sophisticated and shrewder then ever before. They are technologically savvy and expect optimal customer service across different retail channels. Retailers will be "working harder to keep up with smarter shoppers: “always-on” consumers are becoming ever more sophisticated, more technology-driven, and harder to predict," noted the report.

Investing in CRM is crucial in 2017

As consumers engage with technology to enhance their shopping behaviour, brands can leverage this to their advantage and further gain insights into their consumers. Investment in CRM is crucial for 2017. More than ever, fashion brands need to have a global view of their consumers in order to understand what they want, what they like, what they don’t like, and where and how they shop.

Photo credit: Oxford Street, Facebook; Sources: Retailthinktank.co.uk, theretailbulletin.com, BOF McKinsey & Co The State of Fashion in 2017 report