retail-predictions2013.pdf

HOW THE UK WILL SHOP: 2013

VERDICT in ASSOCIATION WITH SAS

Introduction

Welcome to our forecast for UK retail in 2013

UK retailing is set for another year of tough trading as the hoped for economic recovery is put back

further and austerity continues to reign. This Verdict/SAS research shows those sectors and retail

channels best placed to weather the storm, and those that will struggle and sets the scene for retail

in 2013, highlighting the strategies, trends and innovations that will best ensure survival and aid

growth.

Cindy Etsell

Industry Marketing Manager – Commercial

SAS UK & Ireland

Wittington House

Henley Road

Marlow SL7 2EB

Tel:: +44 (0)1628 490 929 ■ Mobile 07918 724 381

[email protected]

www.sas.com/uk

Maureen Hinton

Practice Leader UK Retail

Verdict Research

119 Farringdon Road

London

EC1R 3DA

Tel: +44(0) 207551 9423

[email protected]

www.verdict.co.uk

For more information contact:

About SAS

SAS is the leader in business analytics software and services, and the largest independent vendor

in the business intelligence market.

About Verdict

Verdict Research is the leading authority on retailing. Its research and publications provide

executives in a wide range of business sectors with unrivalled independent analysis of retail sectors

& trends.

mailto:[email protected]

http://gbrkibo.suk.sas.com/C12/Marketing/Document Library/Templates/www.sas.com/uk

mailto:[email protected]

http://www.verdict.co.uk/

SECTION ONE INTRODUCTION & SUMMARY

UK retail in 2013 – summary of key points

UK retail set to grow by 1.8% in 2013 to £300.7bn – the highest rate

of growth since the recession began

Larger growth in food retail (2.9%) compared to non-food retail

(0.8%) but this is being driven by price inflation

In reality, food retail volumes are set to grow by just 0.2% while

volume in non-food retail will grow by 1.0%

Food spending will grow by £15.9bn between 2009 and 2013, up

from the £15.4bn growth seen between 2004 and 2008

Non-food spending returns to growth but spending levels are still

behind the pre-recession peak of £173.3bn in 2007

DIY & gardening will be retail’s best performing sector in 2013, but

the 3.3% growth is reflective of declines in the preceding two years

Home entertainment sectors will decline the largest, with music &

video spending set to fall by 6.3% in 2013

Online will overtake bricks & mortar retail in the books sector

market share in 2013, accounting for 52.9% of all sector sales

Retailers with international expansion plans will continue this in

2013, with Europe, India and the USA offering attractive prospects

Primark is signalling further commitment to expansion in

Germany, while Tesco, Topshop and Ikea mull moves into India

Stronger performing channels will be grocers, online and

shopping centres, due to convenience and competitive pricing

Specialist stores, in particular, music & video and book stores will

suffer, as their reliance on a single product will hit volume growth

Amazon will benefit from the demise of bricks & mortar retailers in

music & video and the casualty of Comet in late 2012

Older shoppers will increasingly become an important

demographic to retailers, particularly online

We forecast that shoppers aged 55+ will be the fastest growing

demographic online, rising by 31.9% between 2011 and 2016

The tablet boom, both as gifts and to shop with, and m-commerce

will continue strongly in 2013, so website optimisation is a must

Highest growth rate since recession began – but

largely down to rising prices

UK retail expenditure year-on-year growth (%) 1973-2013e

UK retail is set to grow by 1.8% in 2013 – the highest rate of growth since the recession began.

Growth is, particularly the all-important food & grocery sector largely attributed to price inflation,

meaning that in reality, we are spending more to buy pretty much the same amount. Price inflation

across total retail in 2013 will be 1.1%, compared to a volume growth of 0.7%, but this is the first

positive growth in retail spending volumes since 2010, and the highest since 2007.

Food remains the main driver behind retail growth, at 2.9%, but this is vastly due to price inflation,

with volume growth of just 0.2%. Food spending will have grown by £15.9bn in the five years to

2013, slightly higher than the £15.4bn growth between 2004 and 2008.

Non-food returns to growth after a two-year hiatus, with a forecast growth rate of 0.8% in 2013.

Since a peak of £173.3bn in 2007 non-food spending will have shrunk by £8.5bn by the end of

2013.

2013 UK retail expenditure to grow by 1.8%

Source: Verdict Research

14.415.6

20.5

15.214.713.7

16.3

12.0

7.1 7.48.5

7.18.3

9.18.2

9.0

7.1 7.16.1

4.8 4.5 4.9 4.8

7.15.5 5.0 5.4

4.2 4.6 5.03.4 3.8

1.32.7

3.62.0

-0.4

1.60.9 1.0

1.8

1973 1978 1983 1988 1993 1998 2003 2008 2013

UK retail expenditure growth year-on-year 2008-13e (%)

Total Non-food Food

+1.8%

0.8%+3.1%

£300.7bn £164.8bn £135.9bn


2008 2009 2010 2011 2012 2013e

Total retail Food & grocery Non-food

%

UK retail expenditure 2013 value (£bn) and year-on-year growth (%)


Home entertainment sectors in biggest loss

Volume growth in non-food, while only 1.0% in 2013, is at its strongest rate since 2007 when it

was 4.3%. As confidence starts to cautiously improve later in the year, spending in clothing &

footwear will increase, while homewares and furniture & floorcoverings will benefit from people

making smaller alterations and decorating projects to their homes as they prepare to potentially

sell up once housing transactions pick up in 2014.

Food & grocery spending will add another £4.1bn in 2012, owing to price inflation and pressures

on global pricing.

Clothing & footwear growth will dip below £1bn in 2013, but this can be attributed to the vicious

circle of discounting seen in 2012 that is set to continue into the start of 2013. It is thought that

retailers will try and encourage investment from consumers into ‘full price’ spending rather than

waiting for promotions, but this will require effort and a need to push value-for-money and product

quality to get consumer buy-in into spending more.

The biggest loser in 2013 will be the home entertainment sector, with declines in books, news &

stationery of 2.8% and a steep fall of 6.3% in music & video. The lure of online away from brick &

mortar retail is due largely to cheaper prices, as well as the increasing traction towards digital

formats in place of physical items in these sectors, owing to streaming services and e-

readers/tablets meteoric rise in popularity.

2013 retail spending

Change in value of expenditure (£m) 2013 on 2012


£457m

-£165m

-£432m

£489m

£913m

£4,116m

Home entertainment

Other markets

Home related sectors

Health & beauty

Clothing & footwear

Food & grocery

1.1

2.9

-0.2

0.70.2

1.0

1.8

3.1

0.8


Inflation/deflation Volume Value

%

Growth drivers year-on-year in total retail, food and non-food (%) 2013 on

2012


26.0

15.4

10.6

15.2 15.9

0.7


2004-2008 2009-2013

£bn

Growth in retail spending


2013 – UK retail sector forecasts

Food & grocery volume growth will stutter as global food price rises

fuel growth

• Volume growth in food & grocery will be just 0.2% in 2013. With increased prices in-store, shoppers

will have very little room to buy more as many struggle to keep up with inflation.

• Global food prices look set to continue to rise in the next year. Increases in grain prices are having a

knock-on effect on wheat, meat and dairy, while rising fuel prices will continue to exert an upward

pressure on supply chain and logistics costs.

• In 2012, the sector came under intense scrutiny for the prices paid to dairy farmers. This has brought

the issue of food prices to the fore with consumers now more aware of industry practices.

• Suppliers have long been at the mercy of larger supermarkets, which have been able to negotiate so

as to not pass increased costs onto shoppers. But with a heightened focus on fair payments to

suppliers and increasing global food prices, even retailers better equipped to absorb price rises into

margins will struggle not to pass inflation onto shoppers.

• Not only will 2013 be a difficult year for suppliers, retailers and consumers will continue to feel

increased inflationary pressures, and with the global food supply set to remain volatile, we expect this

to continue in the future.

Growth returns to DIY & gardening, while food price

inflation lifts food & grocery

3.3 3.1 2.6 2.0 1.0

-1.1-2.8

0.4-0.5

DIY & gardening Food & grocery Health & beauty Clothing &

footwear

Homewares Electricals Other markets Furniture &

floorcoverings

Books, news &

stationery

Music & video

-6.3

Growth 2013 on 2012 by sector (%)


• DIY & gardening is set to become retail’s strongest performing sector in 2013 as it receives a

bounce-back performance from gardening. The challenging growing conditions caused by the

wettest April and June on record severely impacted the market in 2012. Against such harsh

comparatives, we forecast that the greenstock and growing sectors in particular will achieve

exceptional growth in 2013.

• DIY will also report growth, albeit on a smaller scale, with decorative materials being the most

buoyant sub-sector. Shoppers conducting small decorating projects to freshen up their homes and

make minor repairs, as they start to consider putting their house on the market, will be the main

factor for this. Inflation will drive growth in DIY though it is set to decline for the third consecutive

year as retailers work harder to improve efficiencies, with savings being passed on to customers.

• Another trend we forecast happening will be DIY specialists rationalising space, which is set to

decline by 1.1%. As well as weaker independents being forced out of the market, DIY superstores

are in the process of reducing their footprint, either by closing stores or sub-letting excess space

to third party retailers. The superstores are using online not just as a sales channel, but as a

means to drive footfall into stores, especially through reserve & collect facilities. However, retailers

must ensure they get the right balance between maintaining sales while reducing space.

DIY & gardening: 2013’s best performing retail sector bounces

back – but from a low base


• Recovery in 2013 will be far more gradual than initially anticipated, as consumers remain very

cautious about spending on discretionary items. Consumer confidence will gradually improve,

accelerating expenditure growth and volumes of clothing & footwear items.

• Space expansion will slow as protecting profitability remains a priority after four years of increased

pressure on margins. Many mature UK retailers now have large store portfolios, so we expect retailers

to slow opening plans and rationalise their existing store presence to ensure all outlets are profitable.

• The vicious cycle of discounting will continue in 2013, but retailers will try to escape the pressure of

markdown and encourage consumers to invest in full-price items. This will be a gradual process.

Consumers have become accustomed to discounting and will initially be reluctant to pay full price for

brands that were more accessible due to lower price points. It is essential that retailers provide good

value for money through range and product quality so consumers can justify spending more.

• In 2013, we expect online to overtake bricks & mortar as the primary books retail channel,

accounting for 52.9% of the market. The driving factor will be price, with Amazon and Play.com able to

offer lower prices than those typically found on the high street. Increased ownership of e-readers will

lead to a further fall in sales, due to the lower cost of e-books. We expect the overall book market to

shrink by 4.6% in 2013.

• The knock-on effect of online and e-reader growth to bricks-and-mortar retail will not be too severe.

The tangible qualities of physical books help maintain their appeal, as does visiting bookshops and

taking one’s time to decide on purchases. But nostalgia will only help physical retailers so much, and

as the market leans towards digital, we will see a notable contraction on the high street in 2013, in

terms of both sales and physical presence.

• News retail sales are expected to fall by 1.2%, while WH Smith’s poor performance and the demise

and subsequent takeover of Clinton Cards highlight the fragility of the stationery sub-sector. Our

forecasts predict a 3.5% decline. As consumer budgets remain strained, premium stationery is one of

the first luxuries to be sacrificed, while the budget end of the spectrum is increasingly covered by

grocers and general merchandisers, leaving little room for specialists to grow.

Clothing & footwear grows as confidence rises and retailers try to

end discounting cycle

Health & beauty – premium products encourage higher prices, but

price wars remain for everyday items as grocers gain traction

• While volumes will be up in 2013 compared to 2012, it will be another difficult year as consumer

confidence remains low and disposable incomes are squeezed. We expect health & beauty to be

one of the more resilient sectors but the difficult economic climate will have an impact.

• Inflation will be higher in premium products but will stay very low in everyday items, driven down

by intense price competition from grocers and general merchandisers. While some products are

necessity-driven such as OTC medicine, consumers are unwilling to cut back or trade down in

areas such as skincare and cosmetics despite the weak economy.

• New space is coming from grocers and general merchandisers. Boots and Superdrug are not

expanding as competition is intensifying and Boots has such a saturated store portfolio in the UK.

The Perfume Shop continues to expand their presence in the UK but this will slow over the next two

years. Smaller specialists such as Lush and Molton Brown are opening new space.

• The quarter-on-quarter easing of steep declines we have seen from Q2 2012 onwards are set to

continue into 2013, with growth returning to the sector in Q3. This will be driven by a rise in the

number of housing transactions in Q3 as more affluent shoppers start to move house. However, it

should be noted that the initial increase will be due to inflation and in monetary terms is only a rise of

£9m. For the majority of customers, their economic position will encourage them to defer larger

purchases until later.

• Upholstery and beds & bedroom furniture are forecast to grow in 2012. This will be largely due to

the expansion of upholstery retailers, such as DFS and CSL, and the closer links between beds and

the wellbeing of customers. There is a question mark over the future of Dreams and if this results in

a number of store closures, there will be opportunity for other bed retailers to gain market share.

• All other sub-sectors are forecast to contract as shoppers hold off on big ticket discretionary

purchases until the housing market and their personal financial position improves. We forecast this to

occur in 2014, the first year of growth since 2007.

Furniture & floorcoverings declines slow, returning to growth later in

2013 Books, news & stationery increasingly threatened by web presence and e-

readers


• The electricals market in 2013 is likely to spend time adjusting to life without Comet. While some of

its 243 stores may remain as electrical outlets, the likelihood is that the brand will only survive online,

and a handful of stores will be bought by competitors such as Dixons, Maplin and Staples.

• One of Comet’s problems was its reliance on large appliances, demand for which has been hit by the

stagnant property market. We see no significant uplift in housing transactions before the second half

of 2014 so demand for white goods will be restricted mainly to the need to replace broken ones.

• Tablet demand will continue throughout 2013 and beyond. What was once a market Apple had for

itself has been expanded exponentially by cheaper, but extremely capable, devices from Amazon,

Asus and Samsung.

• The price of gold will remain high, driving inflation in this category though volumes will be impacted.

• Volumes in toys and games will remain high with parents not willing to cut back on spending for

children. Retailers will take advantage by pushing up prices, but this will partly be offset by grocers

expanding in this area and general merchandisers growing space, increasing price competition.

• The sports market will continue to be dominated by Sports Direct at the value end targeting the mass

market, and smaller specialists at the premium end targeting more serious sports enthusiasts. Price

competition will remain rife at the value end, mainly from Sports Direct, but also grocers gaining

traction in this area.

• 2012 saw a boost in bicycle sales due to the Olympics and Bradley Wiggins winning the Tour de

France. This will see sales lift in bicycle accessories such as baskets, padlocks and bells in 2013.

Moreover, increasing popularity in the cycle-to-work scheme in 2013 will boost the category.

Other markets: price competition rife in niche retail sectors

Homewares sees meaningful recovery as cooking and baking work

to stem deflation from promotional activity

• For the first time since 2008, volume growth will be positive in homewares in 2013, as the sector

begins to head towards a meaningful recovery. 2013 will be the first significant year of growth

following a marginal rise in 2012. The housing market is unlikely to see a significant recovery until

2014 but consumers are likely to spend more in anticipation of better market conditions.

• Due to a high level of promotional activity, and significant market share being held by grocers and

value players, inflation will be low in 2013, at just 0.1%. This price competition, especially with

textiles & soft furnishings, combined with the relief of cotton price increases, will put real downward

pressure on deflation.

• Scratch cooking, home baking and television cookery programmes will yet again be a driving

force in homewares, with more shoppers picking up the trend, along with associated products.

Volume will grow, and with high innovation in products contributing to high price points, will work to

counteract deflationary pressure on the sector.

• Online will be a key battleground between the established players and bright new entrants in

2013. While some of these plucky new pretenders have been snapping at the heels of the

established players for a while now, their high design and unique offers will be more widely

recognised in 2013, generating interest and buzz in the homewares sector.

Electricals holds on with growth in tablet sales, but Comet demise

will take adjustment

• Brown goods will struggle to make much impact in 2013 without any major sporting events to boost

TV sales and the ongoing failure of 3D and “Smart” technologies, to drive earlier replacement of

existing panels. Japanese TV manufacturers have slashed global production capacities, and retailers

will need to upsell customers to larger and higher quality screens to compensate for lower volumes.

The long rumored arrival of an Apple-manufactured TV set does not seem to be imminent, which is

disappointing as TV is an area desperately in need of innovation.

• One area where this may come from is cheap internet connected set top boxes, which can make

any TV a “Smart” TV. Google and Apple are developing in this area, and if the products they release

can demonstrate smooth integration with Android/iOS smartphones and tablets, and deliver the

content consumers want, they could change the way we view, and interact with, TVs forever. Internet

connected devices are infecting all areas of the electicals sector, and audio - which has suffered in

recent years as hi-fi sales have given way to cheaper iPod sales which then fell away when replaced

by smartphones – is seeing some benefit as more consumers look to fit multi-room systems in their

houses which are connected wirelessly to their digital music collections. While this sort of

implementation has been seen as expensive and complicated in the past, a number of products are

being released which attempt to make such set-ups more accessible. We expect these to be major

sellers in 2013, though retailers must invest in strong customer service to communicate the benefits.


Music & video spending set to fall to £2.7bn as cheaper prices online

and streaming and downloading continues its dominance

• Customers continue to eschew the high street in favour of the cheaper online channel. This

will result in further consolidation in bricks & mortar retail, with the last remaining specialist,

HMV, likely to close further stores throughout the year. Non-specialists such as the grocers will

sweep up some of HMV’s share, though their limited offer – typically focused around chart

releases – will not cater for everyone, driving greater traffic online, with Amazon the main

beneficiary.

• Overall, we expect online to account for 80.1% of total music & video sales in 2013, and by

2017, this will stand at 97.7%, highlighting the bleak outlook for physical retailers.

• Also affecting sales is the continued popularity of streaming services such as Spotify and

LoveFilm Instant, increasingly negating the need to own physical media. With increased

smartphone/tablet ownership and improved mobile data allowances, subscribers can now

access media on the move.

• Illegal downloading is another thorn in the side of the sector, and this is set to continue in

2013. Though the government has made a token effort to curb online copyright theft, it has

not been enough of a deterrent. The continued bleak economic outlook in the UK will only

serve to exacerbate this, with many consumers downloading illegally to save money.

Proposed further legislation is not scheduled to come in until 2014, and even then it will

not truly curb piracy. In addition, those that are deterred are unlikely to return to the retail

channel, favouring streaming services.

• In contrast to music & video, the video games market will remain relatively buoyant, with

a number of marquee titles helping to maintain sales. Annually released titles such as EA

Sports’ FIFA series also guarantee a steady revenue stream. The concern is the lack of

forthcoming next generation consoles from Sony and Microsoft, mooted for release in

2014/15. This prospect of new hardware will lead to a reluctance among gamers to invest

too much money in their current consoles, though for 2013 at least, this should not have

too much of an impact.

80.1

52.9 42.3

14.3 11.4 5.5 6.1 5.5 5.5 Music & video Books Electricals Clothing &footwear Homewares DIY & gardening Furniture & floorcoverings Food & grocery Health & beauty

Online penetration by sector (%), 2013


Retailers continue movements to foreign shores for

growth opportunities

• Those struggling to grow share in the UK will seek growth opportunities abroad. In the clothing &

footwear sector Eastern Europe, China and North America are sought after markets by the likes of

Primark, H&M, Topshop and Marks & Spencer.

• The developments and changes to foreign direct investment in India has made the country

attractive to retailers. Ikea is considering investment for 25 stores and Tesco currently has no

physical presence in the country but runs the infrastructure for its joint venture partner Trent’s Star

Bazaar chain. Topshop, Uniqlo and Max Mara are also considering entry.

• Furthermore, a number of European retailers already established in India have expansion plans.

Examples include Marks & Spencer, whicih opened its 25th India store in Bangalore in April 2012

and has plans for around 60 outlets by 2014. Debenhams has plans for 30 stores in 13 cities.

• Moves into Europe in 2012 have included Marks & Spencer launching transactional websites in four

countries (Germany, Spain, Austria and Belgium). H&M has opened stores in Bulgaria, the latest in

its capital Sofia, and Priimark continues to roll out stores in Germany, with as many as 150 planned

from just eight at present.

• The merger between Boots and American pharmacy chain Walgreens means we should see Boots

launching own labels in Walgreens over the next five years.

Global moves in 2013

Topshop

Boots

Retailer Destination

America

Marks & Spencer

H&M

Primark

Europe

India

House of Fraser

Ikea

Tesco

Topshop

Middle East

Examples of global retail moves

Winners & losers 2013 – channels

• Channels that offer shoppers convenience and flexibility will be the

strongest performers.

• The ‘all in one place’ element of online, shopping malls (which offer a

multitude of retail brands) and large supermarkets is a draw for busy

shoppers. Supermarkets are continuing to expand non-food offerings,

particularly online, and the ease of finding large, sometimes unique

product ranges across a variety of online retailers will remain appealing.

• Those retailers that offer a click & collect/reserve & collect facility will offer

even more flexibility to consumers. Supermarket chains have charged on

this in Christmas 2012.

• Online offers strong price competition across a number sectors but this is

particularly a challenge for books and music & video retailers, the former

of which will see online overtake bricks & mortar in terms of sales in

2013. Music & video is already dominated by online, and the last

remaining specialist on the high street, HMV, will face a struggle and is

likely to close more stores.

• In 2013, online will account for more than 11% of total retail spending,

with Verdict forecasting a 15.0% share of total retail for the channel in

2017.

Convenience, digital and pricing remain winning

strategies

Online

Grocers/supermarkets

Shopping malls

General merchandisers

Specialist retailers

Music & video/book retailers

(brick & mortar)

Need high volumes but

reliant on single product type

Struggle to compete on price

Convenience,

Large product ranges

Competitively priced

Click & collect will win out

UK online retail expenditure (£bn) 1998- 2013e and share of total

£6.0

£7.8

£10.4

£13.9

£17.2

£20.1

£23.6

£27.1

£31.1

£35.3

£0.4

£1.8

£3.2

£1.0

£3.8

£4.8

0.2 0.5 0.8 1.4 1.6 1.9 2.3 3.0 3.8 4.9 6.0 7.0 8.1 9.3 10.5 11.7

1998 2000 2002 2004 2006 2008 2010 2012e

Value (£bn) Share of total retail (%)


Retailer highs 2013

• The big news for homewares in 2012 was Dunelm Mill overtaking long term market leader John Lewis to the top of the homewares sector. 2013 will see further growth from Dunelm Mill, as it extends its new found lead at the top from 0.1 percentage points to 0.4. John Lewis is picking up share however, and its stylish design led homewares ranges will prove a genuine thread to Dunelm.

• The fight over Comet’s market share will result in a major boost for Dixons’ PC World and Currys fascias. Dixons has been brazen in targeting Comet stores over the last 18 months, investing heavily in branches located near Comet ones, and so it should be able to attract the largest slice of Comet’s sales. Dixons is now the only major retail electricals chain, but there are dangers to being the last man standing in that without a large physical presence of shops, consumers being to think of that sector’s items as being natural online purchases. Amazon is likely to be the other major beneficiary of Comet’s demise, and so even more of the electricals market will migrate online, never to return. Independents are unlikely to benefit much, as few were located near to Comet’s exclusively out of town locations. They will need to concentrate on customer service and showcasing best in class products to maintain their existence.

• The dominance of online in the music & video sector will result in further consolidation in bricks and mortar retail, with the last remaining specialist HMV likely to close further stores throughout the year. Amazon is likely to be the major beneficiary of the continued push into online

Amazon to benefit from online push into books and

demise of Comet

Amazon

Dunelm Mill

Amazon

HMV

Independents Online continues to pose

competitive threat

One-stop shop

Convenience

Competitive pricing

Food & grocery retailer musts in 2013

• Winners in food & grocery in 2013 will be those who remain customer focused,

providing shoppers with solutions that make grocery shopping better value for

money. Consumers are building a level of immunity to promotional activity now,

often unable to decipher which retailer is the cheapest. So it will be those which

offer a combination of product quality, freshness and convenience alongside price

which will win.

• If Morrisons is able to meet its targets for convenience expansion, as well as break

ground on its online grocery offer, it will be able to pick up market share in both

channels, the two fastest growing for the sector; however it must make a firm

commitment to both.

• A shift of focus from Tesco will start to have an impact in 2013, as it aims to turn the

ailing UK business around. With so many stores in the UK, and its market-leading

position, it has everything to lose, at the expense of several rivals snapping at its

heels. Tesco is reaching maturity in the UK, and regardless of a shift in operational

focus growth through expansion, and therefore market share gains, will be

increasingly difficult to come by.

• Discounters Aldi and Lidl will continue their charge in the UK, though store

expansion will continue to prove difficult as both struggle to secure suitable sites for

new stores. Both have thrived throughout the downturn with their no-frills offer; but

2013 will be the year for discounters to shout about product quality. Shoppers –

especially those in the middle classes – are more comfortable than ever to shop with

the discounters, so to maintain momentum as the environment begins to improve

they must hook shoppers on quality in order to continue to gain market share.

Market leader Tesco has everything to lose as rivals

snap at its heels

Morrisons

Aldi and Lidl

Reinforce quality of

product offering to

shoppers

Give firm commitment to

online and convenience

retail in order to gain

market share

Retailer Must

Ageing popuplation grows in importance for retailers

• Shoppers aged 50+ will represent more than one-third of the UK population by 2016.

• This demographic will be very important to retailers and those that adapt their offering to

suit will benefit from the opportunities.

• We forecast that the 55+ demographic will be the fastest growing among online shoppers.

The fact that an ageing population means that overall those actively shopping will be less

mobile, so will appreciate the convenience, will be a contributor.

• The 55+ demographic will account for almost 10 million online shoppers by 2016, a

growth of 31.9% from 2011.

• The main barriers for shoppers aged 55+ going online to buy are a lack of home internet

access and a lack of confidence in online shopping. But we forecast this to be less of an

issue as more people get internet access. The popularity of tablets will also help. Tablets

are more user-friendly, and the ‘lean back’ approach aids the feeling of a more leisurely

experience, so those that are not familiar with computing will be more drawn to this.

• Therefore, ensuring that websites are tablet-optimised will be vital for retailers looking to

tap into this demographic.

• Grocers will also benefit from the ageing population, as will retailers that offer a large

product range. As older shoppers become less mobile, they will appreciate the

convenience on offer. This is seen particularly in sectors such as health & beauty, where

accessibility is important as certain products are essential for wellbeing.

Older shoppers will be more tech savvy and offer opportunities

3.5 3.8 3.53.0

4.13.5

2.82.1

1.51.0 0.8 0.5

4.33.8

3.12.4

6.5

5.55.0

4.0

2013 2014 2015 2016

15-24 25-34 35-44 45-54 55+

%

Growth among online shoppers by age group


2013 – changing shopping styles

• Convenience is a core factor in how we shop and with the event of

technology and retailers broadening their offering, consumers are zeroing in

on hassle free shopping.

• Shoppers don’t want to spend much time and money on travelling to shops

especially as home delivery is more convenient than ever before. Even

supermarkets are offering one-hour time slots to save people ‘waiting in’ for

their shopping for a long time.

• Consumers will still visit large shopping centres, but as a ‘destination’ day

out. Shopping centres also offer food outlets and entertainment/leisure

options so there is more to do than simply go shopping.

• Smaller, local convenience stores are more important than ever. Consumers

still do a large regular shop, but this is less often and they are more likely to

do ‘top up’ shopping at local stores

• There are fewer reasons to visit ‘big-box’ retail parks, which is where a

number of retail’s casualties since the recession have taken place. The most

recent of these was Comet in November 2012.

• Online will continue to grow and with the growing popularity of m-commerce

(shopping and paying for goods via a mobile phone) the channel will be more

important to retail. Ensuring that transactional websites are optimised for

mobile use is vital.

• The boom of tablets will also mean more access to online shopping for those

that previously have been put off as they are not familiar with computers.

Tablets, with their ‘lean back’ experience are more user friendly than a PC or

laptop, and they are more leisurely to use, being easy to boot up.

Technology and convenience win out

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subsequently prove to be incorrect.

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