Retail market analysts are reporting that in October sales slowed to their lowest level for almost a year as rising interest rates and a slowing housing market hit consumer confidence. The British Retail Consortium (BRC) revealed that like-for-like retail sales in the UK rose by 1% in October – the weakest growth since November 2006.
The BRC’s market experts suggested that the October figures indicated consumers were tightening their belts after the five interest rate hikes since last August.
The KPMG/SPSL Retail Think Tank attributed the pessimistic outlook for Quarter four to three main factors: demand, margins and costs. They believe that growth in demand will continue to slow, as consumers will finally start to respond to their increasing debt levels and growing credit constraints. Retailer margins are likely to suffer in response to slowing demand growth, forcing retailers to discount more heavily.
On the costs front, the development and servicing of the Internet sales channel will be adding another layer of retail costs, such as the additional costs of guaranteeing quicker and more flexible postal deliveries in the run-up to Christmas.
At the same time retailers are in serious danger of putting off customers with early Christmas theming in-store and in their advertising campaigns, warns Dr Tim Denison SPSL’s retail psychologist. “Whilst the temptation for retailers is always to take steps to advance the Christmas shopping boom as much as possible, there will be a point at which consumer mass-irritation gives way to definite veto behaviour.
