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2019 caps fifth year of falling sales for retailers

18 January 2020

Retailers will need to adapt drastically to survive in 2020

The UK high street recorded its fifth consecutive year of falling average annual like-for-like (LFL) in-store sales in 2019, according to figures released today by accountancy and business advisory firm BDO LLP.

BDO’s High Street Sales Tracker (HSST) revealed average annual LFL in-store sales for 2019 were -0.6%. While not a disastrous result on its own, the five year run of negative LFLs is of serious concern to retailers.

Operating costs are continuing to increase while, simultaneously, consumers are restricting what they spend and channelling growing proportions of their income into services and experiences rather than traditional retail.

The result is even more notable when considering the 140,000 jobs lost in retail and total store closures hitting 16,0731 over the course of the year. Record levels of employment and rising disposable income were not enough to raise the mood of the consumer as confidence remained weak in the wake of ongoing political and economic uncertainty around Brexit.

According to BDO figures, the lifestyle category tumbled in 2019, recording 11 consecutive months of negative in-store sales results, with only December providing respite due to a buoyant Black Friday kicking off a period of sustained discounting. December’s positive in-store sales result was the first for lifestyle since January 2018.

Fashion remained volatile throughout the year, with six months of negative in-store like-for-like sales results. The sector capped the year off with a dive of -2.4% year on year from a poor base of -2.0% in the crucial December trading period.

Homewares, however, had a strong 2019 finishing the year with four months of consecutive in-store sales growth. The category improved by +4.2% in December from an already strong base of +9.3% for December 2018.

Meanwhile, average annual non-store LFL sales grew by +16.8%, levelling off in 2019 compared to long-run averages. Nonetheless, consumers continued to stage an exodus from the high street with non-store sales skyrocketing over the course of several key promotional dates throughout the year. In December, non-store sales were up by +24.5% as online sales saw the best monthly results since December 2013.

Sophie Michael, Head of Retail and Wholesale at BDO, said: “2019 was another tough year for the high street. There has been huge job losses across the country, with a number of high-profile brands disappearing from our high streets forever. 

“Wages are rising, employment is high, and consumer spending power should have seen some improvement. However, uncertainty over when and how the UK will leave the EU cast a shadow over the UK retail sector.

“Both consumers and retailers are concerned about what 2020 has in store and it remains to be seen whether the Government fulfils its Future High Streets Fund plans to rejuvenate town centres across the country.”

2020 retail forecast

Commenting on the retail landscape in 2020, Sophie Michael added: “As 17,000 UK shops are forecast to close in 20202, retailers will need to urgently adapt to the changing consumer landscape. They must embrace opportunities to differentiate and adopt measures that will encourage footfall and spending.

“Deal-focused retailers, online flash sales, subscription models and loyalty schemes are becoming more prominent as shoppers increasingly demand discounting and convenience.  In a sector full of hungry expanding players, such as the discounters and innovative tech-based start-ups, more established retailers can’t afford to ignore these demands and new models.”

Top three trends for retailers in 2020

1. The grey pound

Retailers should account for increasingly older shoppers with more disposable income,” says Sophie Michael of BDO. Almost 80% of the growth in the UK population over the next decade will come from those aged 65+. This demographic is forecast to become the highest spending age bracket, predicted to account for 30% of retail spending by 2028.3

2. Smart, connected shopping

Retailers also need to meet modern shoppers’ higher expectations for digital integration. December saw huge growth in online shopping, with non-store like-for-like sales up by +24.5% from the previous December according to BDO’s high street sales tracker, as consumers looked for cashless convenience and quick transactions. Technology is creating smarter, more connected shoppers but, at the same time, it is providing solutions on how to meet these demands in a cost-effective manner.

“Wearable tech, smart payments, voice recognition, 3D printing, AI, virtual reality and advanced robotics are just some of the technologies retailers need to keep abreast of and invest in over the coming years to remain competitive,” says Michael.

Growing revenues will also require more diverse strategies with subscription options, micro-payments, rental services and trading/recycling choices to customers. These are all set to become increasingly mainstream.

3. A sustainable, ethical choice

Committing to sustainability will also help brands connect with shoppers in 2020 as the public increasingly holds retailers accountable to their own values before parting with their cash.

55% of shoppers now say they avoid excessively packaged grocery products most or all of the time, and 44% say they’d be likely to purchase vegan health and beauty products driven by concerns around animal welfare and the environment.4

Sophie Michael says: “Using sustainably-harvested materials, recycled packaging, and efficient shipping and delivery methods is not only a responsible and forward-thinking strategy, but also an excellent way to attract younger shoppers and build brand loyalty and lifetime value.”

ENDS

 

1 Centre for Retail Research

2 Centre for Retail Research

3 GlobalData

4 GlobalData

Note to editors

Accountancy and business advisory firm BDO LLP provides integrated advice and solutions to help businesses navigate a changing world.

Our clients are Britain’s economic engine – ambitious, entrepreneurially-spirited and high-growth businesses that fuel the economy. 

We share our clients’ ambitions and their entrepreneurial mind-set. We have the right combination of global reach, integrity and expertise to help them succeed. 

BDO LLP

BDO LLP operates in 17 locations across the UK, employing nearly 5,500 people offering tax, audit and assurance, and a range of advisory services. BDO LLP is the UK member firm of the BDO international network.

BDO’s global network

The BDO global network provides business advisory services in 167 countries, with 88,000 people working out of 1,800 offices worldwide. It has revenues of $9.6bn. 

Contacts

Erin Dodds
Tel: +44(0)20 7758 3900
Email: [email protected]