In January 2020, we partnered with 3GEM to survey over 300 middle-market consumer business leaders in the UK retail, travel and tourism, leisure and hospitality, and hotels and accommodation sectors. Of those responses, 29 per cent came from the retail sector.

Retail sector headlines

Retail     74 per cent of retail businesses feel positive about their prospects in 2020, which is the lowest of the four consumer market sectors we surveyed.
Retail     Only 56 per cent of businesses feel more positive about their business prospects than they did 12 months ago.
Retail     Negotiating rental rates has been, and continues to be, a priority. Only 12.5 per cent of businesses have not considered negotiating with landlords.
Retail     74 per cent of retail businesses have had trouble recruiting in the last 12 months.
Retail     The top technologies retail businesses are planning to adopt in the future are AI (44 per cent), edge computing (41 per cent), machine learning (39 per cent) and blockchain (38 per cent).

Outlook for 2020

Optimism within the retail sector may appear high, with 74 per cent feeling positive about their prospects for 2020. But this is the lowest result of the four consumer sectors we surveyed and is also below the industry average of 81 per cent. Also, only 56 per cent of decision makers feel more positive about their business prospects than they did 12 months ago. With current challenges in the sector ranging from rents to National Minimum Wage, it’s not surprising that retailers feel less positive than other sectors.

Looking forward, retailers expect environmental concerns (47 per cent), sustainability (45 per cent) and digital lifestyles (42 per cent) to be the consumer trends that will impact their business most. This appears to be at odds with the sector’s priorities, as 51 per cent of businesses said reducing costs was their top focus. 

43% of retail businesses say the economic climate is the biggest threat in 2020

Threats to the market

43 per cent of retail business leaders say the economic climate is their biggest threat in 2020, closely followed by supply chains (37 per cent). With many retailers relying on international supply chains, it’s no surprise that these are the top concerns for the sector. The recent Coronavirus emergency only serves to highlight these concerns as we start to see the effects of China’s lock down on international markets. 

Driving cost efficiencies

As expected, reducing costs is a key focus for the retail sector with 51 per cent noting this as their top priority for 2020. This was significantly higher than other consumer markets sectors. For traditional bricks and mortar retailers, rent and rates are a significant fixed cost. In our survey, 22 per cent of retail businesses said they’ve previously negotiated rental rates and an additional 66 per cent said they’re either in the process of doing so or plan to do so. This sentiment is in line with the increasing number of Company Voluntary Arrangements (CVAs) we are seeing in the market, something we expect to continue into 2020. 

48% of retail leaders see investment in technology as a top priority for their business

Retaining talent

Consumer businesses continue to look for the best ways to attract and retain talent, with 74 per cent of retail businesses having trouble recruiting in the last 12 months. New immigration laws will further shrink the pool of talent. Not only are businesses struggling to recruit talent, the increase in National Minimum Wage will have a significant impact on employee costs incurred. 

For employees aged 25 or over, the National Minimum Wage is increasing from £8.21 to £8.72 (a 6 per cent increase). Businesses are trying to combat this cost increase by reviewing internal efficiencies and increasing productivity through automation. However, efficiencies through technology alone cannot fully recoup this increased cost. 

Innovation in technology

In 2020, 48 per cent of retail leaders see investment in technology as a top priority for their business. In recent years businesses have placed their focus on customer-facing technology such as social media and mobile apps. Looking to the future, our survey shows a shift in priorities as businesses start to focus on increasing efficiency and reducing costs with technology adoption. Top technologies businesses plan to invest in include AI and machine learning. 

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