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Retailers warned to prepare for tough 2016

Retailers have been warned to prepare for a tough year ahead as consumers shift spending away from retail towards leisure, culture and entertainment.

Although consumer mindset around job prospects and personal finances has improved, this may not translate into more money in retailers’ tills, according to a new report from the KPMG/Ipsos Retail Think Tank. The retail advisory group estimates that retail sales growth will fall back from approximately 1.8% in 2015 to 1.7% in 2016.

Maureen Hinton, global research director at retail consultancy Conlumino, said: “consumers are looking beyond retail for goods and services to spend their money on.

“This is making it much harder for an over-subscribed retail sector. Leisure, culture and entertainment have shown much stronger growth than retail over the past five years and this trend is being exacerbated by an ageing population,” she added.

David McCorquodale, UK head of retail at accountancy firm KPMG, said that the implementation of the national living wage before April 2016 is also set to pose an added financial burden.

“It will have a significant overnight increase to the cost base but it is  much more complex than a simple rise in hourly rate as it has a knock-on impact on pay differentials, staff discounts, tea breaks and pensions. It is further complicated with the wage set to increase for each of the next four years.”

Jonathan De Mello, head of retail consultancy at property agent Harper Dennis Hobbs, said the review of business rates could force retailers to re-evaluate their approach to location strategies.

“2016 will be a tricky year to get the balance right between cost control and investment,” added Dr Tim Denison, director of retail intelligence at retail consultancy firm Ipsos Retail Performance. “Retailers will need to keep on their toes [and] success will not necessarily come from running quicker; at times it may come from running in a different direction.

“Retailers would be well advised to look outside the sector, not just inside, for inspiration and guidance.”

 

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