The UK retail business has navigated a number of durations of client uncertainty, together with the pandemic and the price of dwelling disaster. Over the following couple of years, the retail business will endure important transformation, formed by evolving client behaviours, technological developments and potential political and financial adjustments.
Be a part of Mintel as we offer a snapshot of the UK retail market panorama – together with perception into different international areas – highlighting alternatives, challenges and rising tendencies that may outline the business’s trajectory within the close to future. For a complete retail business evaluation, protecting 18 retail sectors, together with how the ten largest retailers within the UK have ranked towards each other for the previous 5 years, you should buy our UK Retail Rankings 2024 Report.
Financial Outlook of the UK Retail Trade
The UK retail market skilled a second consecutive 12 months of excessive inflation in 2023, resulting in a give attention to important objects and a difficult atmosphere for discretionary classes. Whereas retail gross sales grew in worth phrases, this development masked an underlying quantity decline.
Transferring ahead, Mintel’s retail business insights reveal that the market is anticipated to point out a mixture of conservation and reasonable development, buoyed by rising client confidence and elevated disposable incomes. Nevertheless, the efficiency throughout completely different sectors varies. E-commerce continues to develop, albeit behind the broader retail sector, recording a 3.9% improve in on-line gross sales, pushed by the comfort, variety and worth notion amongst shoppers. In distinction, brick-and-mortar shops face ongoing challenges, together with lowered foot visitors and heightened operational prices.
UK Retail Market: Sector Efficiency
The inherent necessity of the grocery sector signifies that the demand for this class remained insulated and comparatively secure, even throughout monetary turndowns. In keeping with Mintel’s Supermarkets Market Analysis, the grocery market measurement is anticipated to develop to £241 billion in 2028. Nevertheless, this doesn’t imply shoppers aren’t adopting savvy procuring behaviours in response to the elevated costs, with 73% of UK shoppers spending extra time searching for the most effective offers in meals shops. Correspondingly, the German meals discounters Aldi and Lidl each secured a spot within the prime 10 retailers within the UK.
Whereas grocery demand continued to outpace non-food classes, store-based style noticed an uptick in quantity development in 2024. This upswing will be attributed to a weaker comparative efficiency in style retail throughout 2023 and stronger client demand as out-of-home footfall recovered, boosted by over six in ten Era Z and Millennials having purchased garments in-store within the final 12 months. To assist keep post-pandemic curiosity, a number of clothes specialists are increasing into new classes like magnificence and private care to spice up income alternatives. Main the way in which is Marks & Spencer, which has added magnificence retailer Estee Lauder Perfume and launched its personal Contemporary Parts skincare vary to its choices.
As seen throughout different instances of financial adversity, the “Lipstick Impact” struck once more. Shoppers, dealing with harder instances, turned to the retail remedy of magnificence merchandise, indulging in reasonably priced luxuries to brighten a bleak financial image. Magnificence and private care buy exercise stays regular inside the retail market, with 9 in ten UK shoppers making BPC purchases in-store. Nevertheless, on-line purchases are on the rise, with three-fifths of Brits making on-line BPC purchases. One purpose behind this improve is that buyers can learn evaluations and examine merchandise freely. Comparable in-store shopping for tendencies may also be discovered throughout the pond, with two-thirds of Canadian class patrons having made a BPC buy at a drug retailer and virtually seven in ten US People choose to buy in-store, expressing a choice for sampling merchandise earlier than buying.
The upper ticket residence classes have struggled in 2023/4, reporting a decline compared to the numerous enhance seen through the pandemic, when the nation had extra time to spend at residence as a consequence of lockdowns, giving them a possibility to finish DIY tasks . The price of dwelling disaster has hampered shoppers’ discretionary spending and led shoppers to prioritise spending areas outdoors of residence enchancment, leading to a decline in quantity phrases in main residence classes comparable to furnishings, family home equipment, and DIY. In a bid to diversify, the DIY retail market has shifted their advertising and marketing and innovation efforts in direction of smaller ticket residence enchancment tasks comparable to portray and adorning, to assist shoppers replace their areas in a budget-friendly nature.
On-line gross sales have settled post-pandemic, with occasional spikes throughout occasions like Black Friday. The proportion of on-line gross sales has stabilised at round 25-27% of complete retail gross sales in 2024. Though the expansion of the net market was behind the expansion of the broader retail sector, three-quarters of UK internet buyers say that the most effective costs are discovered on-line, serving to the sector insulate demand with a constructive worth notion.
A full and complete breakdown of 18 retail sectors and main retailers’ efficiency in these sectors, together with Footwear to Meals, and Well being and Magnificence to Homeware and plenty of extra will be present in our full Retail Rankings 2024 Report.
Retail Trade Tendencies and Alternatives
Enhanced client expertise by way of group retail
Retail areas are evolving to offer extra than simply merchandise; they’re changing into group hubs, locations the place shoppers can have interaction in enriching experiences. This contains creating areas for socialising, studying and internet hosting group occasions, which helps to construct emotional connections between the retailer and client and due to this fact improve buyer engagement and loyalty. One retailer that’s efficiently innovating on this rising group retail house is Gymshark. Based in 2012 as an online-only direct-to-consumer (DTC) model, Gymshark opened its flagship retailer in Regents Road, London in 2023. The shop brings Gymshark’s purposeful health however enjoyable ethos to life by internet hosting experiential parts, from one-to-one private coaching stations to in-store Sweat Courses. This health model’s entry into bodily retail will hopefully encourage brave strikes from different online-first manufacturers to broaden into the bodily house, one thing which is crucial for the way forward for the excessive road.
The rise of the round economic system
Shopper demand for sustainability and round economic system practices is multiplying throughout the UK retail market. As shoppers grow to be extra environmentally acutely aware, they appear to retailers to steer by instance to supply eco-friendly merchandise and cut back the scale of their carbon footprint. One notable sustainable retail business pattern is the rising curiosity within the secondhand economic system. Mintel’s retail business insights report UK Model Overview reveals that two-fifths of shoppers have bought secondhand merchandise. Even within the US, the secondhand market is anticipated to develop, notably within the smartphone sector, influenced by the notion that smartphone innovation has peaked (alongside the monetary and environmental advantages). Over a 3rd of US People have beforehand chosen to purchase a refurbished telephone, and Mintel predicts this can proceed to rise, particularly amid instances of economic turbulence. Manufacturers are inspired to leverage this pattern to construct buyer loyalty, attraction to shoppers’ money-saving pursuits and exhibit sustainability commitments.
One standout retailer who’s innovating on this house is the Finnish model Swappie which launched merchandising machines that enable shoppers to purchase, promote, or recycle second-hand smartphones, aiming to extend the reuse and recycling of outdated telephones. This mannequin gives 24/7 entry and comfort, encouraging round habits amongst shoppers.
This round observe extends into the style sector the place virtually half of Germans and 16-34-year-old Brits have purchased secondhand garments. By shopping for secondhand garments, shoppers can align their environmental values by selling reuse, lowering the demand for brand new manufacturing and contributing to a extra round style business. The German model Zalando is a superb instance of an organization pushing style into increased circularity. In 2021, Zalando rolled out a care and restore service to interact with shoppers post-purchase and to assist prolong product life as a lot as doable. Schemes like this attraction to shoppers’ heightened give attention to eco-friendly pursuits whereas constructing a brand-consumer relationship constructed on belief and longevity.
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Expertise adjustments the retail procuring expertise eternally
Staying aggressive within the retail sector requires steady innovation. Because of this a multiplying variety of retailers are introducing tech-driven services to assist entice new clients and improve buyer loyalty. Improvements comparable to AI-powered customer support will help observe client preferences and in flip, make real-time suggestions which might be personalised to the consumer. An instance of a standout initiative was B&Q and Screwfix’s proprietor Kingfisher who just lately launched the primary AI-powered assistant within the residence enchancment and DIY sector. Utilizing generative AI to help clients at residence with their DIY tasks, the AI assistant offers step-by-step recommendation on a spread of residence enchancment tasks in addition to tailor-made product suggestions. This use of AI completely illustrates how procuring experiences will be uniquely personalised and will help improve general buyer satisfaction.
Challenges for Manufacturers within the Retail Trade
Financial uncertainty and client savviness
Confronted with rising inflation, manufacturers within the retail market must persistently exhibit worth to shoppers, which is able to assist alleviate the financial strain forcing cutbacks in discretionary spending. Submit-pandemic, shoppers have adopted savvy procuring behaviours and grow to be extra value-conscious, typically looking for the most effective costs by way of on-line analysis and social media evaluations. Since Mintel predicts that this pattern is more likely to persist, retailers might want to give attention to offering aggressive pricing and worth propositions comparable to specializing in effectivity, multifunctional merchandise with long-lasting claims, loyalty schemes and trial choices.
Ongoing provide chain points
Mintel’s Retail Rankings 2024 Report outlines that offer chain resilience stays a crucial concern for retailers. Greater than half of retail executives are involved about provide chain disruptions impacting their operations in 2024/25. These disruptions are attributed to components comparable to geopolitical instability, logistical challenges, and uncooked materials shortages. Rising prices and provide shortages will proceed to problem each the retailer and the patron since elevated operational prices restrict retailers’ potential to guard costs for the patron. To mitigate this problem, retailers must implement superior provide chain analytics to help sustaining provide, along with diversifying suppliers by supporting native manufacturers.
Technological integration
The retail business’s digital transformation has heightened the sector’s vulnerability to cyber threats, with important incidents reported to the Info Commissioner’s Workplace. Retailers face an necessary stage of their digitalisation the place they have to implement sturdy safety measures comparable to encrypted information storage, common audits and cross-company worker coaching applications to safeguard delicate data and keep client belief.
As mentioned earlier on this article, the impression of AI in customer-facing areas inside the retail market is rising quickly. Nevertheless, the tempo at which retailers plan to leverage AI capabilities is outpacing client consciousness, with practically a 3rd of shoppers not realizing a lot about AI, though they’re conscious of the time period. Whereas there may be nonetheless scepticism and distrust from shoppers round AI, manufacturers should resist the temptation of accelerating the adoption course of and as an alternative strategy it with warning and set up clear communication when AI is used. In keeping with Mintel’s Digital Lives of Shoppers Report, over three-quarters of UK shoppers agree that corporations ought to make it clear when interactions contain AI. These findings reveal a want for manufacturers to be clear and upfront about AI involvement, which ought to assist manufacturers handle client expectations and foster belief for a extra constructive expertise.
Innovate within the Retail Market with Mintel
Trying forward, the way forward for retail lies in cautious adaptation. Whereas technological developments supply thrilling potentialities, the tempo of change should align with client consolation. Moreover, the rising curiosity within the round economic system and sustainable practices presents a major alternative for retailers. By embracing these tendencies, manufacturers can showcase their dedication to environmental accountability and construct stronger, long-term relationships with shoppers. Financial downturns undoubtedly result in savvier procuring habits, nonetheless, as client confidence and disposable earnings rise, a promising path lies forward for the retail business.
Curious the place your model stands towards the UK’s prime retailers? Our Retail Rating Report 2024 delivers a deep dive into the previous 12 months, analysing:
Sale densities: Establish prime performers and benchmark your personal gross sales technique.
Retailer efficiency: Uncover key tendencies and improvements shaping the market.
Class breakdowns: Achieve insights into particular segments driving the UK retail panorama.
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