The downturn that wasn’t

2017 was the year when the downturn didn’t happen. All the macroeconomic indicators were turning down – inflation was rising, real incomes were falling, at the end of the year we had the first increase in interest rates in 10 years, and Mintel’s own consumer confidence surveys showed that consumers were becoming more cautious. But retail sales held up well, even in October and November when the comparisons were especially challenging. In absolute terms the credit figures look alarming, but in real terms they are still a long way below the 2008 peak.

When we look back on 2017 it seems to have been dominated by corporate news: the Tesco/Booker deal, the first Bunnings store opening, Amazon’s Whole Foods takeover, and right at the end of the year, Steinhoff’s accounting concerns.

Looking ahead to 2018

The retail sector is well placed heading in 2018. In 2017, the clothing retailers had a much better year, after the negative weather effects we saw in 2016. But that wasn’t reflected in the performance of the market leaders as both Next and M&S lost market share.

Online increased its share of retailing, though, again, roughly half of online sales are through the websites of store-based retailers and it would be overly simplistic to blame online for the problems of the leading fashion retailers.

Dixons Carphone stands out in household goods for another strong performance, fully justifying both the merger and the store based strategy of the group. The books sector is tiny, but highly significant in that it is the first sector to regain market share that had been lost to online.

2018 must surely bring the slowdown that we were expecting for 2017. The squeeze on consumers pocketbooks can only get worse and the markets are expecting another increase in interest rates around mid year. But consumer confidence is all important because Brits will not increase their borrowings if they are more worried about their prospects. Mintel consumer confidence indicators show that confidence is weak. If we are right, then it will be the household goods sectors that will be worst hit. Food retailers are always among the more resilient sectors, but Aldi and Lidl continue to grow and the shift towards shopping locally is far from finished. Clothing demand must slow after such a strong showing in 2017. Online will, again, see the strongest growth.

So on that note, we wish all our readers a very happy New Year.

Richard Perks is Director of Retail Research at Mintel where he advises clients, writes retail reports and presents webinars. Richard joined Mintel in 1999 and oversees the content and strategy of the retail reports. He regularly provides analysis to the global media on retail issues. Almost all of Richard’s career has been in retail analysis and before joining Mintel, Richard worked in the City, both on the buy side and sell side, and as a journalist.