According to Retail Economics and the Office for National Statistics tell us how retail sales remain robust, however footfall on high streets and shopping centres have been declining.
The latest data from Springboard suggests that total footfall was down 0.8% in June, year-on-year. High Streets performed the worst with footfall estimated to decline by 2.8% year-on-year. Shopping Centres did not fare much better with a decline of 2.4%, continuing the overall trend of declining visitor numbers in traditional shopping locations.
Retail Parks saw growth of 2.8% year-on-year, the 18th consecutive month of positive growth. Using a three-month rolling average, to smooth out volatility, suggest that retail parks continue to outperform all other physical channels of retailing. We believe that the reinvention of many retail parks to bring a greater mix of leisure and experiences in addition to retail is driving footfall to these locations. Non-food retailers, such as Home and Leisure which typically have a higher exposure to retail parks, are continuing to benefit from high levels of footfall through this channel.
However, there is growing evidence that consumer recovery is benefiting non-retail components the most. Just one third of consumer spending goes through retail and the growth of Recreation and Culture and Transport (including new and second hand cars) is critical to retail spend.
Retailers do not appear to have benefitted to the same extent as other parts of consumer spending over the last 12 months. A comparison of consumer spending growth against total retail sales growth, as measured by the BRC-KPMG Retail Sales Monitor, reveals that for the first time in over 10 years, consumer spending is consistently outpacing retail sales. This recent trend has posed us with some interesting questions – why has the retail sector not benefitted as much as other parts of consumer spending?
Understanding the differences in sales measures is very important. So while we feel that the BRC’s measure is likely to represent a more accurate representation of the health of the retail sector than the ONS measure, the sample is much smaller and it doesn’t pick up the performance of small retailers.
A direct comparison of the extent to which growth rates between the ONS and BRC have differed reveals that over the last over the last 12-18 months the gap appears to have grown.
One possible explanation of the difference could be attributed to the performance of small retailers. The BRC’s measure consists of sales from around 60 large retailers whereas the ONS measure includes c. 5,000 retailers, the majority of which are small retailers. While we feel confident that the BRC measure is a more accurate indication of the performance of large high street retailers, it does not account for the performance of smaller retailers. Is it possible that smaller retailers in the UK are doing that well?
Other survey evidence suggests that there has been a revival in independents on UK high streets. The Local Data Company recently claimed that independent shops are growing at their fastest rate in years with a net increase in the number of stores. Higher vacancy rates on high streets (10.2% in April 2015 according to the BRC and Springboard) has led to cheaper rents and with the continued support from Small Business Rates Relief – it’s becoming commercially viable to open small operations, especially when they are combined with a healthy online offering.
The combination of a revival of independents and a move from consumers towards marketplaces such as eBay and Amazon (which give may small retailers a vital route to market) could explain the underperformance of large retailers in the UK market, in the context of strong consumer spending numbers.
For more information read part 1.