Rise in UK consumer spending

UK consumer spending in September rose at the fastest rate so far in 2017, with the exception of a peak in April around Easter, according to Reuters. A survey revealed that  price rises of food and clothing after the Brexit vote accounted for much of the spending increase.

According to figures from the British Retail Consortium (BRC), retail sales increased 1.9% annually on a like-for-like basis, up from 1.6% in August.

The increase indicates that British shoppers are adjusting to the inflation rise which occurred following the drop in the value of the pound after the Brexit vote in June 2016. The Bank of England is expected to announce its first interest rate increase in a decade in the coming months.

BRC confirmed that growth in total sales in September fell to 2.3% in September from 2.4% in August but was still stronger than in most months of 2017.

BRC chief executive Helen Dickinson said: “Spending is still focused towards essential purchases with consumers buying their winter coats and back-to-school items, but shying away from big-ticket items such as furniture and delaying the renewal of key household electrical goods.”

Food sales increased 2.5% in the three months leading up to September, while non-food sales only increased 0.5%. The Confederation of British Industry announced in September that its retail tracking indicated unexpected growth in sales to a two-year high in September, boosted by sales of food and clothing.

Consumers raise a glass to celebrate Britain’s sporting success

Britain’s supermarkets have seen alcohol sales rise as shoppers celebrated the country’s success at the Olympic and Paralympic Games.

Market research firm Kantar Worldpanel on Tuesday released its latest figures for the grocery sector, showing that supermarket sales increased by an overall 0.3% in the 12 weeks to 11 September 2016, despite continued deflation of 1.1%. Alcohol sales performed particularly well.

Fraser McKevitt, head of retail and consumer insight at Kantar Worldpanel, said: ‘While overall sales growth has been slow, consumers have been keen to celebrate Britain’s Olympic and Paralympic golden summer, boosting alcohol sales by 8.5% in the past four weeks. Sparkling wines including Prosecco and Champagne led the way with growth of 36% as promotional events across a number of retailers successfully tapped into the nation’s celebratory mood.’

Looking at individual retailers, market leader Tesco had a successful summer ‘Drinks Festival’ which helped grow its alcohol sales faster than any other major category.

McKevitt noted that, although Tesco’s sales have not yet returned to growth, a decline of 0.2% year-on-year is its best performance since March 2014. During the period its market share declined 0.1 percentage points and Tesco now accounts for 28.1% of the overall grocery market.

Sainsbury’s is in second place on 15.9%, followed by Asda (15.7%), Morrisons (10.4%) and the Co-op (6.6%).

‘Co-op continues to outperform the market with sales growth of 3.1%, primarily through its own label lines,’ McKevitt said. ‘The convenience retailer was another to post strong alcohol sales, though its produce lines were its fastest growing category, helping market share increase to 6.6%.’

Discounters Aldi and Lidl are also going from strength to strength: Aldi increased its sales by 11.6% in the 12-week period and Lidl saw sales rise 9.5%.

Both chains are benefiting from opening more stores as well as an increased spend per customer.

‘Aldi and Lidl continue to grow – not only are both continuing to expand their store estates but existing customers are visiting more frequently and upping their basket size,’ McKevitt explained.

‘The discounters are helping drive the industry-wide growth in premium own-label lines, with marketing campaigns moving away from showcasing only price to a focus on quality – collectively, premium own label grew by 29.5% in the discounters this period,’ McKevitt added.

‘Shoppers now spend an average of £19.24 when visiting the discount retailers and at a time of falling prices this increase of 4% is not to be sniffed at.’

Aldi to launch online shopping site for fine wines by the case

Discount retail chain Aldi has revealed that it plans to introduce a new online shopping site for wine for home delivery or for collection from third party locations in early 2016.

It was announced on Monday that the company’s online wine shop will be followed by the launch of non-food Specialbuys in Spring 2016. Aldi Specialbuys include electrical, baby& toddler essentials, camping and clothing, along with gardening or DIY products, which are only available for a limited time.

Aldi currently operates 598 stores in the UK and expects to open 65 new stores this year. Although its operating profits fell to GBP260.3m from GBP271.4m in the 12 months to 31 December 2014 partly due to price cut, the UK’s sixth biggest supermarket achieved record annual sales in 2014, when its sales rose 31% to GBP6.9bn, in comparison to GBP5.27bn in the previous year.

Matthew Barnes, CEO of Aldi UK, reportedly stated that the company would not necessarily start selling food online, but said that “I wouldn’t say it’s inevitable. Wine by the case and non-food is the most viable place for us to start.

“We wouldn’t do anything to endanger our model or threaten our cost base.”

Barnes added: “As the grocery market continues to evolve, our unique model, operational efficiency, private ownership and financial strength mean we’re able to keep investing in our business – from people and presence to products and prices.”

Back to school costs boosts UK retail sales in August

Retails sales in the UK increased during August 2015, partly due to sales of school uniforms and equipment, according to the Office for National statistics (ONS) seasonally adjusted Retail Sales, August 2015 report released on Thursday.

The ONS monthly retail business survey revealed that UK retail sales continued to sustain year-on-year growth, with the volume of retail sales in August 2015 estimated to have increased by 3.7% when compared with August last year. This was the 29th consecutive month that retails sales had grown.

Underlying pattern in the data, as suggested by the quarterly movement in the quantity bought, indicates a 0.4% increase in growth for the 30th consecutive month.

The quantity of goods bought in the retail industry during August 2015 is estimated to have increased by 0.2% compared with July 2015.

There was a fall in average store prices, including petrol stations, in August 2015, dropping by 3.3% in comparison to the previous August. Last month was recorded as the 14th consecutive month of decreases in year-on-year prices.

Retail spending increased by 0.2% in August 2015 when compared with August last year. However this figure decreased by 0.3% compared with July 2015.

Online sales were higher by 7.4% in August this year, as compared with August 2014, but decreased by 2.7% when compared with the previous month.

Estimates of performance in the retail sector reported by ONS are based on a monthly survey of 5,000 retailers, including all large retailers employing 100 people or more and those with annual turnover of greater than GBP60m who employ 10 to 99 people. ONS estimates that this survey covers approximately 95% of all known retail turnover in Great Britain.

UK pop-up space marketplace attracts more customers

Pop-up retail businesses are now worth GBP2.3bn to Britain’s economy, according to a new report commissioned by digital communications company EE and carried out by the Centre for Economics and Business Research (Cebr), which showed that the sector achieved 12.3% more revenue this year compared to 8.4% in 2014.

This is the second annual report into the pop-up sector from independent consultancy Cebr, which conducted a business survey of 342 middle managers and above in retail/ restaurants services and hotel/ lodging industry in all business sizes, along with a consumer survey of 2010 British adults. The online survey was undertaken between 17 and 20 July 2015.

The annual Britain’s Pop-Up Retail Economy report indicates that this sector is growing much faster than predicted, with the number of customers increasing and spending more.  The survey found that 44% of respondents visited a pop-up in the past year and spend an average of GBP8 more per month. Pop-ups are now said to account for 0.76% of total UK retail turnover, up from 0.6% the year before. This represents an increase of more than GBP200m in sales.

There are now an estimated 10,000 pop-up retail businesses in the UK and the sector employs over 26,000 people. Traditional retailers are using pop-ups to test and expand into new locations and product lines. The report found that 8% opened a pop-up at some point in the past year, while 10% plan to open one in the next five years.

However, the report also showed that the pop-up sector is being held back by technology because internet connection remains one of the biggest challenges and is crucial for point-of-sale (POS) devices and stock management tools. More than 40% of small retailers are still unable to take card payments and 25% say sales have been lost as a result of insufficient stock management systems.  

EE is addressing this problem with the launch of new Connected Retail bundles, which includes 4G tablets, the Shopwave point of sale (POS) app, contactless iZettle payment devices. All the bundles are on flexible contracts that reportedly cost much less compared to traditional POS solutions. 

Winners of a competition called Space for Ideas, held by retail space marketplace Appear Here, will be the first UK businesses to use EE Connected Retail. Appear Here’s Space for Ideas launch two week residencies in shops across London this week. The winners of the competition include Porterlight, a bespoke cargo bike builder; WonderLuk, a 3D printed jewellery brand; Run&Fell , an ethical clothing brand; and The Mini Edit, a children’s online clothing brand. Each business will be given prime retail space in London for two weeks, along with Connected Retail from EE, advertising from the London Evening Standard and funds and design agency support to build their shops.

Managing economist for Cebr, Rob Harbron, commented: “Pop-up retail is continuing to become an increasingly viable platform for both people with new business ideas and for established businesses looking to engage with customers in new and innovative ways. Successful retailers increasingly need to offer customers the ability to shop when and where they want. As such, the flexibility of pop-up stores makes the format increasingly attractive. However, without appropriate investment in technology, efficiently co-ordinating a range of platforms is becoming increasingly challenging for businesses.”

Founder and CEO of Appear Here, Ross Bailey, added: “This report highlights how important the pop-up sector is becoming to the UK economy. With so many traditional retailers using pop-up shops and so many pop-up retailers moving onto long-term rents, we should no longer be looking to draw a line between traditional retail and pop-up retail – it is all just retail. We’re seeing brands and retailers from all backgrounds incorporate pop-up retail into their retail strategy. Since launching in 2013, Appear Here has grown by 500% year on year and currently generates GBP14m in request value per month, a number which is increasing month on month. This is a testament to the growth of the industry.”

Co-operative Group suffers heavy losses of £2.5bn in 2013

The Co-operative Group, a British consumer cooperative that operates a range of retail businesses, announced its final results for the 52 weeks ended 4 January 2014 on Thursday, which showed losses of GBP2.5bn for 2013 when compared to losses of GBP529m for 2012, reportedly the worst results in the group’s 150-year history. Group operating loss was GBP148m for 2013, in comparison to profit of GBP142m for the previous year.

According to the group, the losses reflected the impact of its Bank recapitalisation. The Co-operative Bank has losses of GBP2.1bn, which included a trading loss of GBP1.44bn for the year to December, when the group gave control of Co-op Bank to US hedge funds. The group also took another charge of GBP625m when over 70% of the bank’s shares were handed to bond investors.

The results were also impacted by goodwill impairment of GBP226m, which arose on the acquisition of supermarket retailer Somerfield; however the Co-operative Group Food business achieved a robust second-half in like-for-like performance, with an overall 0.6% increase. Full year like-for-like sales in the Food division for the year fell by 0.2%, while LFL sales in core convenience chain rose by 1.6%. The effects of store disposals, a shorter accounting period and price reductions were reflected in lower revenues and underlying operating profits of GBP210m over the full year, which were down from GBP 297m the year before.

Group sales for 2013 were GBP10.5bn for 2013, compared to GBP11.0bn in 2012. Funeral sales were GBP370m, increased from GBP358m the year before, while Pharmacy sales dropped to GBP760m from GBP764min 2012. There was also a fall in General Insurance sales in 2013, which were GBP476m compared to GBP580m in 2012.

As part of the move to meet its obligations under the Bank recapitalisation plan, the trading group syndicate bank facilities have been renegotiated. The group has also reduced its net debt by GBP286m to GBP1.4bn as a result of the disposal and sale and leaseback of property assets and the sale of the remaining motor dealerships.

Capital expenditure was lower at GBP239m in 2013, compared to GBP410m in 2012, which reflected the necessity to provide capital for the Bank and to reduce debt.

Interim Group chief executive of The Co-operative Group, Richard Pennycook, stated: “2013 was a disastrous year for The Co-operative Group, the worst in our 150-year history. Today’s results demonstrate that but they also highlight fundamental failings in management and governance at the Group over many years. These results should serve as a wake-up call to anyone who doubts just how serious the challenges we face are.”

Chair of The Co-operative Group, Ursula Lidbetter, commented: “During 2013, it became apparent that our governance had fallen far short of the standards to which we aspire as a co-operative society. Now is the time to put that right through fundamental reform – we have to act with urgency if we are to lay the foundations for a stronger, healthier co-operative business in the future.”

Bad weather hits UK retail sales

Retail sales across the UK fell between February and March this year because of bad weather, the Office for National Statistics (ONS) reported today.

The quantity bought in the retail sector decreased by 0.7% in March compared to the prior month, while the amount spent remained unchanged.

In comparison to the same period last year the quantity bought was down by 0.5%, broadly in line with economists’ expectations. This follows strong year-on-year growth of 2.5% in February 2013 and a year-on-year decrease in January of 0.6%. The amount spent increased by 0.1% between March 2012 and March 2013.

Over the whole of the first quarter, retail sales increased by 0.4% compared with the preceding three-month period.

With severe winter weather in much of the country, consumers embraced online shopping last month. The ONS reported that “non-store” retailing registered its biggest rise since March 2009.

In total, UK consumers spent an average of GBP601.4m online each week in March 2013. This represents an increase of 20.5% compared with March 2012.

Excluding automotive fuel, the amount spent online accounted for 10.4% of all retail spending.

Commenting on today’s figures, the British Retail Consortium’s director general, Helen Dickinson, said that the coldest March for 50 years had resulted in mixed fortunes for different retailers. While food sales were strong due to Easter celebrations and the cold weather, sales were sluggish for seasonal items like spring and summer fashion ranges.

David Kern, chief economist at the British Chambers of Commerce, pointed to the “encouraging” growth in sales between the fourth quarter of 2012 and the first quarter of 2013 which he said reinforces the organisation’s hope for a small rise in GDP, with the services sector offsetting weaker areas of the economy such as manufacturing and construction.

Tesco to pull out of US market

UK supermarket group Tesco plc (LSE:TSCO) is to exit from the United States, the company announced today.

The Fresh & Easy venture was launched in Nevada, California and Arizona in 2007 but has consistently made a loss in recent years and Tesco started a strategic review of the business in December 2012. The company has now written down the assets of its US business and booked a provision for ongoing liabilities. The total impact to profit after tax is GBP1.2bn, including a GBP1bn writedown on assets and GBP169m of trading losses in the last year.

Chief executive Philip Clarke told the BBC that the plans to withdraw from the US were “well-advanced” and there was interest from potential buyers for all or parts of the business. The sale process is anticipated to be concluded in about three months’ time.

Tesco has also exited from its Japan operations as of the start of 2013 and said today that it is taking “a more measured approach to our growth in China.”

Meanwhile, in its home market Tesco has recorded a property write-down of GBP804m after a review of its UK property portfolio identified more than 100 sites that the company no longer plans to develop. Most of these sites were purchased during the property boom between five and ten years ago.

Overall, Tesco reported pre-tax profit of GBP1.96bn for the 52 weeks to 23 February 2013, down 51.5% year-on-year. Including the US writedown Tesco made a profit of just GBP120m after tax, compared to GBP2.8bn last year. The company has maintained its full-year dividend at GBP0.1476 per share.

Group sales for the year rose 1.3% to GBP72.36bn. In the UK market total sales grew 1.8% to just over GBP48bn, although UK trading profit declined by 8.3% to GBP2.27bn after a significant investment in improving the business.

UK sales excluding fuel and VAT for the fourth quarter of the financial year rose just 0.5%, a slowdown from growth of 1.8% in the six weeks to 5 January, when the company saw strong Christmas trading.

January snow hits UK retail sales

UK retail sales declined from December to January, surprising economists who had forecast sales to grow at the start of the year.

Figures released today by the Office for National Statistics (ONS) show that the quantity of goods bought in the retail sector dropped by 0.6% from December 2012. Sales volumes also fell by 0.6% from a year ago.

Most downward pressure came from a significant drop in food sales: the quantity bought in the food sector last month was estimated to have fallen by 2.6% year-on-year, to the lowest level since April 2004.

Commenting on the figures, John Longworth, director general of the British Chambers of Commerce, said that although they only represent a single month, the drop in retail sales is a “serious warning” to the government, indicating that more needs to be done to get the economy growing again.

There were contrasting fortunes for smaller and larger retail outlets last month, with large stores seeing sales increase. There was an overall fall in the quantity bought in small stores and the contrast was particularly marked in the food sector.

Smaller retailers told the statistics agency that the heavy snow in the second half of January had affected their sales, while large store retailers reported that some of the increase they had seen in the quantity bought by consumers had come from a rise in online shopping.

Overall, online sales represented 10.1% of all retail spending (excluding automotive fuel) last month and the average weekly spend online was estimated at GBP546.5m, an increase of 8.7% compared with January 2012.

In the food sector the proportion of sales made online rose by 27.1% year-on-year and equated to 3.7% of all food sector sales, the highest on record.

The total amount spent in the retail sector in January 2013 was GBP24bn, unchanged from January 2012, with an average weekly spend of GBP6.1bn. Over the course of the year, the prices of goods sold in the retail sector increased by 0.8%.

E-crime costs UK retailers £200m a year

Internet crime is the biggest emerging threat to the UK’s retail sector, the British Retail Consortium (BRC) claimed today.

This type of criminal activity is a growing threat to retailers as more and more Britons choose to shop online and through their mobile devices.

The BRC’s first e-crime study, which assesses the make-up and scale of e-crime, estimates that the total cost of e-crime to retailers in 2011-12 was at least GBP205.4m.

The figure includes GBP77.3m in losses from crimes such as personal identification-related fraud, refund fraud and phishing, as well as crime-prevention costs and legitimate business lost as a result of such measures – for example honest customers being deterred from continuing with an online purchase by additional online security measures.

Furthermore, the retail trade association asserts that e-crime is twice as costly as overall retail crime, in proportion to the total value of sales. It represents 0.75% of the GBP28bn of online retail sales in 2011, while the GBP1.4bn cost of retail crime as a whole is 0.36% of the GBP303bn value of all retail sales.

The UK is seen as a world leader in online retailing, with the biggest Internet spend per-capita of any country and 11% of global Internet retail sales, but the BRC said today that the government and law enforcers need to take e-crime more seriously if the sector is to maximise its contribution to economic growth.

It claimed that many retailers lack confidence in the official response to e-crime, with 60% of those questioned saying it was unlikely they would report any more than 10% of e-crimes to police.

Specifically, the BRC is calling for consistency on reporting, recording and investigating e-crime across the country and for more police resources to be directed towards e-crime.

Retailers who took part in the BRC’s first e-crime study, which was carried out in April and May 2012, included supermarkets, department stores, fashion, health and beauty stores and mixed retail.