Bloomberg News

Miracle on High Street Needed in U.K.’s Xmas: Retail

November 16, 2011

(Corrects time-period for online sales in 11th paragraph.)

Nov. 16 (Bloomberg) -- U.K. retailers relying on Christmas to save their year may need a miracle.

December retail sales in the country will be no better than last year’s 36.2 billion pounds ($57 billion), according to Deloitte LLP. That would be the first holiday with no growth since 2008, when the financial crisis that followed the collapse of Lehman Brothers Holdings Inc. caused consumers to cut their budgets.

“It’s as tough as anyone can remember and with sales flat at best this year it’s going to be harder than ever before to be in the winners’ enclosure,” Ian Geddes, retail partner at Deloitte, said in an interview. Only those with strong online offerings are likely to prosper, he said, as consumers seek cheaper prices and convenience by ordering over the Web.

Deloitte estimates that U.K. retail sales will be stagnant until 2013 as consumers face job insecurity, government spending reductions and rising prices. Dixons Retail Plc and Home Retail Group Plc’s Argos may be among the most affected as shoppers cut back on purchasing larger items such as televisions, said Matthew Stych, an analyst at Planet Retail. Weak holiday sales could bring “carnage” as some retailers struggle to make quarterly rent payments, he said.

Inflation was 5 percent in October, with the consumer-price index near the highest since records began in 1997.

The prospect of slow holiday sales has already led some retailers to start discounting as they seek to entice shoppers. Debenhams Plc, the U.K.’s second-largest department-store chain, said yesterday it will drop prices by as much as 40 percent for five days starting Nov. 16. That compares with discounts of as much as 25 percent last year.

Shares Decline

Debenhams shares are down 8.7 percent this year while Marks & Spencer Group Plc, Britain’s largest clothing retailer, has dropped 9.8 percent. Consumer-electronics retailers are doing worse, with Dixons shares falling 51 percent and Home Retail declining 58 percent.

Sellers of electronics products will face some of the “strongest headwinds” over the holiday, hurt by competition from online retailers, weak consumer confidence and the lack of a “must-have” gadget, according to Fitch Ratings.

“Retailers had seen 3D televisions as one possible area of strong demand this year, but so far the reception has been lukewarm and prices have dropped sharply,” Fitch analyst Simon Kennedy said by e-mail yesterday.

Online Sales

Online retailers such as Inc. will be “the big winners” over the holiday, according to Planet Retail’s Stych.

U.K. Internet sales will climb 15 percent in December and will total 30 billion pounds this year, Deloitte estimates. More than 40 percent of all transactions by value being are influenced by Web research, price comparison and social media recommendations, according to Deloitte.

John Lewis Partnership Plc, owner of the largest U.K. department-store chain, is among retailers that may benefit most from a shift in consumer behavior toward mobile ordering, online kiosks in stores and home delivery, Stych said. The retailer has rolled out free WiFi in its stores and “click and collect” points where customers who order online can arrange delivery to their local store or Waitrose grocery chain.

Debenhams is installing kiosks on every floor of every store so shoppers can order out-of-stock items, while Marks & Spencer is testing them in three outlets.

West End

Dubbed “Style Online,” Marks & Spencer’s trial is equivalent to a 300 square-foot (27.9 square-meter) boutique, where items not normally available in stores are on display. Customers can browse products, build an outfit online, watch 70- inch screens of women modeling various looks, and then order from touch-screens kiosks or from advisers equipped with Apple Inc. iPads. In the past “no one would have bought a single piece because they didn’t exist in those stores,” Chief Executive Officer Marc Bolland said this month.

NCR, a supplier of kiosks, digital signage and automatic teller machines, says installation of kiosks has risen almost fivefold this year as retailers adapt them to consumer needs.

Deloitte’s forecast of unchanged Christmas sales is supported by London’s West End shopping area, which expects holiday business to match last year’s 1 billion pounds. Revenue is up 4 percent so far this year, driven by sales of luxury goods, according to New West End Company Chairman Dame Judith Mayhew.

The outlook for spending in 2012 isn’t encouraging.

“Next year is no good, partly because it’s the first full year of spending cuts, but also job insecurity and uncertainty from the euro zone crisis,” Deloitte’s Geddes said. “Those combined mean customers being much more cautious.”

--Editors: Paul Jarvis, Sara Marley

To contact the reporter on this story: Sarah Shannon in London at

To contact the editor responsible for this story: Sara Marley at

Ebola Rising
blog comments powered by Disqus