A New Year is supposed to bring renewed vigor and optimism for the 12 months ahead. Unfortunately for U.K. retailers, 2013 has already been written off by the KPMG/Ipsos Retail Think Tank (RTT) as another tough year with austerity measures continuing to hit consumer confidence.
The RTT also expects the population’s real pay to fall further in 2013, with inflation continuing to outpace pay growth. As a result, household incomes will fall by approximately 0.8 percent this year.
“Austerity Britain is here to stay and 2013 will feel remarkably like 2012,” said David McCorquodale, head of retail at KPMG. “The lack of economic growth and shaky consumer confidence will result in yet another year of deferred discretionary spend, especially for retailers selling big ticket items.”
Meanwhile, the Kantar Worldpanel measure of grocery price inflation increased sharply to 4.5 percent for the 12-week period ending 23 December 2012, which further suggests this year may bring a renewed period of pressure on household budgets as shoppers trade down to cope. Food inflation has been following a rising trend since September last year, the market research company said.
There was, however, some good news for retailers as the year drew to a close. According to Kantar Worldpanel’s latest grocery share figures, published last week, the grocery market grew 3.2 percent in the 12 weeks ending 23 December, with the strongest growths recorded at the discount and premium ends of the market.
Among the big four supermarkets, Sainsbury’s was the only retailer to increase its market share (to just over 17 percent), said Edward Garner, director at Kantar Worldpanel.
In its sales figures, also published last week, Sainsbury’s recorded its strongest trading week ever for the week before Christmas with customer transactions exceeding 27 million. It took over GBP 100 million (USD 160.6 million, EUR 122.6 million) in sales on Christmas Eve alone.
The market’s biggest retailer, Tesco, saw its market share dip slightly from 30.6 percent to 30.5 percent, but Garner said this was an improvement on the performance seen throughout 2012, when the average share drop was 0.4 percent.
“The well-publicized under-performance of Morrisons continues and it is the only big four supermarket to lose sales compared with last year. This highlights its need to address the lack of convenience outlets and an online offering in 2013, as already clearly identified by the retailer,” said Garner.
The ongoing strong performances of both the premium and discount ends of the market continued in the lead up to the holidays. Waitrose achieved 5.4 percent growth, while Aldi, Lidl and Iceland posted growth rates of 30.1 percent, 10.8 percent and 9.7 percent, respectively.
Historically, the discounter sector sees its share dip at Christmas as shoppers treat themselves and trade up, but the all-time record market share of 3.2 percent for Aldi is a sign of the times and shows that this is no longer the case, said Garner.
“Aldi and Lidl both benefitted from carrying items such as goose, venison and fine wines in their pre-Christmas catalogues this year. It seems that offering premium products at budget prices has paid off for the discount retailers,” he said.
The polarization of the market is highlighted by consumer spend levels which were widely anticipated to drop in 2012, he said. “While 47 percent of shoppers did reduce their spend in the lead up to Christmas, 48 percent increased their spend by 4.5 percent (the rate of inflation) showing that ‘two nations’ continues to be a key feature of the grocery market.”
Sainsbury’s CEO Justin King singled out the chain’s own label products as a major contributor to its growth.
“They allow them [consumers] to save money without compromising on quality,” he said.
King told BBC News that growth is coming from many areas, including its convenience business and online trading. In addition, Sainsbury’s is extending its stores to “put a better food offer in which is also driving sales.
“You’ve got to get lots of things right for customers in tough competitive markets like this if you’re [going] to be growing,” he said.
King said he expects the challenging economic backdrop to persist, “with customers looking to rebalance their household budget after the festivities” and so consumers are likely to spend “cautiously” in the first few months of 2013.
As a food category that’s regarded by consumers to be expensive, more than ever retailers and brands must ensure their seafood offerings also give the perception of value and convenience. SeafoodSource readers should note there are already reasons to be optimistic: U.K. frozen seafood sales continued to increase last year; at the same time, chilled fish sales started to grow after six years stagnation, thanks largely to the increased popularity and broader range of value-added products.
Perhaps 2013 shouldn’t be completely written off just yet.
