Retail Bulletin – 2006 in perspective.

 

2006 turned out to be a year of rebalance in the drivers of the UK’s economy reports Dr Tim Denison, Director of Knowledge Management, SPSL.

 

The Bank of England has always been keen to see consumers play a leading support role in sustaining the national economy and 2006 saw that transition begin.

 

Footfall figures for the year were the lowest recorded by SPSL since recording began in 1998 with numbers down by 3.9%.  This was nearly double the estimated drop of 1-2%.

 

Rising monthly bills and the slowdown of the economy began taking their toll as early as January when the value of retail sales increased by only 0.2% on a like for like basis.  While consumers were keen to take advantage of clearance promotions and discounts they were value conscious and wanted to avoid any unnecessary spend. This impacted on footfall figures as they dropped 4% compared to Jan 05. 

 

The performance of retail slumped even further in February when shopper numbers were down by 4.9% and sales grew by only 0.6% in comparison to February 05.  This was the forth-consecutive month of growth for retail sales, something that was not seen since October 2004.  These figures however were not a call for celebration as February 05 was a weak period that saw sales levels drop.  Although consumer goods were cheaper to buy than ever before, the ever-rising cost of living dictated where people spent their money.  The average weekly value of sales in February was £4.4billion. That was 0.8% higher than the previous year.

 

March 2006 was always going to fair badly in comparison to March 05 when the deriving factor of Easter was missing.  However performance was worse than any experts had predicted.  Shopping figures were down a colossal 9.5% and retailers were faced with their most difficult start to a year in 10 years with figures showing that the average drop in footfall was 6.5% for the first three months of 2005.   Like for like sales figures dropped 1.4% as the unseasonably cold weather and Easter falling in April hit sales hard.  The average weekly value of sales was £4.5 billion. This was 0.1% higher than March 05.

 

The mass retail rush that is expected with Easter did not materialise in April 2006.  Footfall figures for Good Friday, Easter Sunday and Easter Monday were 5.5%, 4.2% and 7.4% down respectively in comparison to Easter 05.  The holiday period did however help the month record the only rise in retail traffic of 2006 when footfall rose by a paltry 1.4%.  The combined retail sales for April and March show that like for like sales were up only 2.2% while total sales rose by 5.3%.  The unadjusted value of retail sales for the month was 1.4% higher than the previous year with the average weekly value of sales being 3.6% higher at £4.7billion.

 

Neither of the Bank Holiday weekends could boost shopping figures as the wettest recorded May for twenty years saw levels drop by 3% in comparison to 2005.  This represented a lift in comparison to the earlier months of 2006 and gave an indication that the end of the consumer rebalance was insight. Retail sales rose by 3.6% compared to a 2.4% drop in the previous year and the average value of weekly sales was 3% higher than May 05 at £4.7 billion.

 

As the World Cup rolled around, the big talking point was whether the football would encourage or suppress shopping.  Figures reported by SPSL showed that the early rounds of the tournament had an impact on shopping figures as the streets were far quieter especially on Saturday’s when England were playing.  The week of the semi-final and final of the tournament saw the retail traffic index 10.1% lower than the corresponding week in 2005.  Overall June reported a drop of 7.2% in comparison to 2005 although not all retailers suffered due to the World Cup.  Grocery stores reported strong sales in ready meals, snacks and drinks while the sales of large televisions increased dramatically.  It is estimated that the World Cup generated an extra £1billion spending in the economy.  Monthly sales figures showed an increase of 2.3% with the average weekly value of sales being £4.8 billion, 3.7% higher than the previous year.

 

2006 gave a clear indication into how peoples attitudes towards shopping had changed. Gone were the days of people heading to various locations for a variety of items, people were now preferring convenience and heading to large one-stop shopping centres where they could find everything under one roof and were items are extremely price competitive due to the large supermarkets buying powers.

 

In the second quarter of 2006, the retail traffic index decreased by to 4.3% year-on-year.

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