Recovery takes hold but study reveals North-South retail split

CONSUMERS in the North are prioritising their spending on essentials while their counterparts in the South East are indulging in truly discretionary items, according to new research.
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The findings from PwC highlight the economic divide that exists between different regions within the UK. But the accountancy firm said that despite the regional variations, every part of the UK is now moving into positive economic territory.

“It might not be grim up North, but it’s still grimmer than the South East,” said Randal Casson, partner and retail expert.

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PwC hosted its annual retail and consumer trading update yesterday for Yorkshire businesses.

Kien Tan, a director at PwC, said northerners are focusing on groceries, clothing and baby products while southerners are prioritising spending on discretionary items like eating out and other treats. “That’s an indication of the economic position,” he said.

He said retailers can benefit from the variations if they tailor their goods and services accordingly.

The event in Leeds outlined the challenges facing high street retailers as they try to adapt their business models to rapidly changing consumer habits driven by mobile technology.

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Mike Williams, a director at PwC, said: “Overall you have got relatively flat sales, you have got stellar growth in online, you have got modest but inexorable decline in traditional store sales and you have got a rising cost base through having all these new channels to support. How do you make money with rising costs and flat sales?”

He urged retailers to plan for 30 per cent of total revenues to come from online. The average share is now between 10-15 per cent.

The digital revolution is decimating high streets across the land as consumers desert shops in favour of cheaper goods online.

Mr Williams predicted that this process will continue with 80 per cent of retail leases up for renewal during the next five years.

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He added that the retail sector has seen average like-for-like online sales growth of 20 per cent over the last year.

ASOS, the online-only fashion and beauty retailer with a large distribution centre in Barnsley, has been one of the big winners in recent times with its fast-changing fashion designs generating sales of £335.7m in the four months to December.

Mr Williams said: “It was 20 years ago this spring that the first online transactions happened in the UK. It has really taken hold in a major way. It’s scary because nobody quite knows where it is leading.

“What’s going to happen in the next five years is going to be a bigger change than what’s happened in the last 50,” he said.

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Lisa Hooker, a partner at PwC, said good retailers are making sure their prices and products stay relevant and that they continue to know and understand their customers and what their brand stands for.

They are also providing a convenient and engaging customer journey and have a dynamic and coordinated strategy across property, sales channels, stock and marketing, she added.

Ms Hooker said good retailers are developing partnerships with suppliers to help them grow and are investing in systems and information.

She expects to see greater digital engagement with the consumer in the retail experience.

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“You will be there with a hologram of yourself and all your measurements and you will have 3D technology so you can look at yourself online,” she said.

“But it will also recommend. They will personalise your offering and recommend what suits you. Automatically your friends will be able to see it at the same time and say ‘yes’ or ‘no’.”

However, she does see a future for bricks and mortar stores if they can bring together leisure activities like health and beauty and eating and drinking with shopping under one roof.

Mr Tan told the audience of Yorkshire retailers how their international rivals are faring.

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Christmas in the United States was below expectations, which was blamed on poor weather and fewer trading days and was even more promotion-led than the UK, while retail spending remains depressed in parts of Europe, he said.

Mr Tan said: “The good news is pretty much everywhere in the world things are getting better. The recovery is continued to accelerate slightly. Lots of stuff could go wrong, but the central scenario sees an improvement.”

Tom Howard, finance director at Stickyeyes, a Leeds-based digital marketing agency, said international markets offer “one bright spot” for UK retailers, who have some of the most sophisticated online operations in the world.

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