The credit crunch advances

It’s happening in the high street will it happen online?

March 2008

The credit crunch is starting to have noticeable consequences on the high-street as the British Retail Consortium announces poor results for February.

According to the figures consumer confidence has fallen further to all-time lows. Shoppers are still very price-conscious and reluctant to splash out on major purchases, so discounting was still needed to tempt customers to buy.

UK retail sales rose 1.5% on a like-for-like basis, compared with February 2007, when sales were up 3.3% compared with a weak February 2006. The three-month trend rate of growth edged up to 1.6% from 1.5% in January for like-for-like sales, and to 4.0% from 3.7% for total sales, reflecting the continuing growth of retail space.

Food sales remained strong. Despite some continued discounting, clothing and footwear were down on a year ago. Homewares and furniture weakened further, generally down on a year ago, but health and beauty benefited from the early Mothering Sunday.

Stephen Robertson, Director General, British Retail Consortium, said: "After a blip at the start of the year as clearance sales temporarily got customers spending, belt tightening began in earnest in February when the Christmas and New Year credit card bills came home to roost. Although a welcome boost was provided by this year’s early Mothering Sunday, which helped food sales as well as health and beauty, customers remained cautious.

"Both retailers and consumers are being squeezed by sharp increases in utility bills and fuel costs. So the Chancellor's theme on Wednesday should be a Budget to revive the economy, rather than one piling on new taxes and regulations."

Helen Dickinson, Head of Retail, KPMG, said: "The divergence between the best and worst performing retail sectors continues to grow. Food and drink continued their strong start to 2008, with an even better performance than in January. This sector remains the primary driving force behind the figures, given that it's such a large part of total retail spending at around 40 per cent of the total market. Meanwhile at the other end of the retail spectrum, the furniture and floorcoverings sector, which was successful in the New Year sales period in using promotional activity to drive momentum, has seen a contraction in market size in February.

"February's figures are slightly inflated by the timing of Mothering Sunday this year, as spending in the lead up to it is included this month, whereas this occurred in March in 2007. Therefore caution about the outlook remains the order of the day."

The crunch is definitely happening on the high-street, walk into any shop on the high-street and you’re practically knocked over by the amount of tumbleweed rolling down the aisles. But will it happen on the web? The problem is what you’re seeing on the high-street isn't just the credit crunch it's also the slow but gradual death of the high-street as consumers realise that there's more to life than hiking up an down the high street. What do you think? We'd be interested in hearing.

This article is written by Marcus Austin and sourced from www.internetretailing.net