Retail sales are predicted to grow by 2% at most in 2015 as consumer confidence remains fragile, warns the KPMG/Ipsos Retail Think Tank.
David McCorquodale, head of retail at KPMG, said: “2015 will see some growth, but retailers will do well to break through the 2% barrier. There are multiple factors which could knock sales off course, including concern around the general election and an interest rate rise.
“There is undoubtedly growth coming through online sales, but this is a double edged sword. Online sales have a higher ‘cost to serve’, putting even more pressure on retailers’ margins.”
The KPMG/Ipsos Retail Think Tank believes that food sales will remain in negative territory in 2015, caused by price deflation and changes in shopping practices by consumers.
“The food retailers were easily the worst performing sector in the stock market in 2014 and it will be a surprise if they can avoid picking up the wooden spoon in 2015,” said Retail Think Tank member Nick Bubb, who is a retail consultant.
“Profound structural changes in the market sent volume into decline in 2014 and a combination of intense discount competition and good harvests also reduced food prices; things will not get any better in 2015.”
Tim Denison, director of retail intelligence at Ipsos Retail Performance, said: “The retail environment will remain tough, partly because the economy’s momentum is expected to slow, but partly too thanks to the demanding and dynamic market conditions.
“However, there are some bright spots on the horizon. Shoppers will benefit from lower prices particularly in the food sector. Homewares will also continue to improve, but the sector’s fortunes are inextricably linked to the performance of the housing market.”
The KPMG/Ipsos Retail Think Tank warns that 2015 will be an incredibly expensive year for retailers as ever increasing online orders inflated the overall ‘cost to serve’. Unless retailers achieve decent sales growth, this will impact profits over the next 12 months. It concludes that despite margins being under pressure, retailers will need to spend more in 2015 to remain competitive and catch up with consumers’ evolving shopping habits. Evolving technology offers more opportunities to personalise and innovate services, enabling retailers to respond quickly to changing consumer shopping habits, it said.
The KPMG/Ipsos Retail Think Tank was conceived and created in 2006 by Helen Dickinson of KPMG and Tim Denison of Ipsos Retail Performance to provide ‘an authoritative, credible and trusted window on what is really happening in retail’.