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Market Commentary

​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​Weekly Retail & Leisure News - 02 February, 2018

Online drives growth for physical retailers

As the final retailer Christmas performance updates filter in, it is clear that, despite the headwinds, the vast majority (almost nine in ten) of retailers have recorded sales growth over the key trading period. While not downplaying the challenges that remain for UK retailers, it is indicative of the adaptability and resilience inherent in the UK retail sector, both from a consumer and retailer perspective.

The trends that we highlighted last week in our Christmas Trading Special continue to be borne out: the premium / luxury end of the market remains robust (Hotel Chocolat, Selfridges, LVMH all recorded strong growth), while the discounters continue to gain market share (Findel, N Brown, although often at the expense of margin). The importance of innovating and creating the right proposition for customers also shone through, from Hotel Chocolat’s channel innovation (it now sells through Amazon, Ocado and others), Mamas & Papas’ personal shopping initiative (a key driver of growth) to Pets at Home’s investment in its omni-channel offering.

Gaining online share is certainly one of the factors determining ‘winning’ retailers from the rest. Online growth may be slowing, averaging 12.1% growth YoY in 2017 from 15.9% in 2016 according to IMRG Capgemini, but it remains the key driver of growth in UK Retail. Perhaps surprisingly however, the vast majority of online growth over the Christmas period (7.5% out of the 9.4% online growth in December, according to the ONS) was actually driven by store-based operators, not pureplays. Further evidence, if it were needed, of the importance of the omni-channel retail model.

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