The UK retail trade 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 trade will bear vital transformation, formed by evolving client behaviours, technological developments and potential political and financial modifications.
Be a part of Mintel as we offer a snapshot of the UK retail market panorama – together with perception into different world areas – highlighting alternatives, challenges and rising developments that may outline the trade’s trajectory within the close to future. For a complete retail trade evaluation, overlaying 18 retail sectors, together with how the ten largest retailers within the UK have ranked in opposition to 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 yr of excessive inflation in 2023, resulting in a concentrate on important objects and a difficult surroundings for discretionary classes. Whereas retail gross sales grew in worth phrases, this development masked an underlying quantity decline.
Shifting ahead, Mintel’s retail trade insights reveal that the market is predicted to point out a mixture of conservation and average 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% enhance 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 decreased foot site visitors and heightened operational prices.
UK Retail Market: Sector Efficiency
The inherent necessity of the grocery sector implies that the demand for this class remained insulated and comparatively steady, even throughout monetary turndowns. Based on Mintel’s Supermarkets Market Analysis, the grocery market measurement is predicted to develop to £241 billion in 2028. Nevertheless, this doesn’t imply shoppers aren’t adopting savvy purchasing behaviours in response to the elevated costs, with 73% of UK shoppers spending extra time in search of one of the best 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 trend noticed an uptick in quantity development in 2024. This upswing may be attributed to a weaker comparative efficiency in trend retail throughout 2023 and stronger client demand as out-of-home footfall recovered, boosted by over six in ten Technology 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 best way is Marks & Spencer, which has added magnificence retailer Estee Lauder Perfume and launched its personal Recent Parts skincare vary to its choices.
As seen throughout different instances of financial adversity, the “Lipstick Impact” struck once more. Shoppers, dealing with more durable instances, turned to the retail remedy of magnificence merchandise, indulging in inexpensive luxuries to brighten a bleak financial image. Magnificence and private care buy exercise stays regular throughout 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 cause behind this enhance is that buyers can learn opinions and evaluate merchandise freely. Comparable in-store shopping for developments can 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 desire to buy in-store, expressing a choice for sampling merchandise earlier than buying.
The upper ticket house classes have struggled in 2023/4, reporting a decline compared to the numerous increase seen through the pandemic, when the nation had extra time to spend at house because of lockdowns, giving them a chance to finish DIY tasks . The price of dwelling disaster has hampered shoppers’ discretionary spending and led shoppers to prioritise spending areas outdoors of house enchancment, leading to a decline in quantity phrases in main house classes akin to furnishings, family home equipment, and DIY. In a bid to diversify, the DIY retail market has shifted their advertising and innovation efforts in direction of smaller ticket house enchancment tasks akin 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. Despite the fact that the expansion of the net market was behind the expansion of the broader retail sector, three-quarters of UK web shoppers say that one of the best costs are discovered on-line, serving to the sector insulate demand with a optimistic 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 may be present in our full Retail Rankings 2024 Report.
Retail Trade Developments and Alternatives
Enhanced client expertise by way of group retail
Retail areas are evolving to supply extra than simply merchandise; they’re changing into group hubs, locations the place shoppers can have interaction in enriching experiences. This consists of 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 area is Gymshark. Based in 2012 as an online-only direct-to-consumer (DTC) model, Gymshark opened its flagship retailer in Regents Avenue, 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 Lessons. This health model’s entry into bodily retail will hopefully encourage brave strikes from different online-first manufacturers to broaden into the bodily area, one thing which is essential for the way forward for the excessive road.
The rise of the round financial system
Client demand for sustainability and round financial system practices is multiplying throughout the UK retail market. As shoppers grow to be extra environmentally acutely aware, they give the impression of being to retailers to steer by instance to supply eco-friendly merchandise and cut back the scale of their carbon footprint. One notable sustainable retail trade pattern is the rising curiosity within the secondhand financial system. Mintel’s retail trade insights report UK Model Overview reveals that two-fifths of shoppers have bought secondhand merchandise. Even within the US, the secondhand market is predicted 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 cellphone, and Mintel predicts this can proceed to rise, particularly amid instances of monetary turbulence. Manufacturers are inspired to leverage this pattern to construct buyer loyalty, attraction to shoppers’ money-saving pursuits and reveal sustainability commitments.
One standout retailer who’s innovating on this area is the Finnish model Swappie which launched merchandising machines that permit shoppers to purchase, promote, or recycle second-hand smartphones, aiming to extend the reuse and recycling of outdated telephones. This mannequin affords 24/7 entry and comfort, encouraging round habits amongst shoppers.
This round follow extends into the trend 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, decreasing the demand for brand spanking new manufacturing and contributing to a extra round trend trade. The German model Zalando is a good instance of an organization pushing trend into greater circularity. In 2021, Zalando rolled out a care and restore service to have interaction with shoppers post-purchase and to assist lengthen product life as a lot as attainable. Schemes like this attraction to shoppers’ heightened concentrate on eco-friendly pursuits whereas constructing a brand-consumer relationship constructed on belief and longevity.
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Expertise modifications the retail purchasing expertise perpetually
Staying aggressive within the retail sector requires steady innovation. Which means a multiplying variety of retailers are introducing tech-driven services to assist appeal to new prospects and improve buyer loyalty. Improvements akin to AI-powered customer support can assist observe client preferences and in flip, make real-time suggestions which can be personalised to the person. An instance of a standout initiative was B&Q and Screwfix’s proprietor Kingfisher who lately launched the primary AI-powered assistant within the house enchancment and DIY sector. Utilizing generative AI to help prospects at house with their DIY tasks, the AI assistant supplies step-by-step recommendation on a variety of house enchancment tasks in addition to tailor-made product suggestions. This use of AI completely illustrates how purchasing experiences may be uniquely personalised and can assist 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 have to constantly reveal worth to shoppers, which can assist alleviate the financial strain forcing cutbacks in discretionary spending. Put up-pandemic, shoppers have adopted savvy purchasing behaviours and grow to be extra value-conscious, usually looking for one of the best costs by way of on-line analysis and social media opinions. Since Mintel predicts that this pattern is prone to persist, retailers might want to concentrate on offering aggressive pricing and worth propositions akin 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 essential challenge 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 akin 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’ means to guard costs for the patron. To mitigate this problem, retailers have to implement superior provide chain analytics to help sustaining provide, along with diversifying suppliers by supporting native manufacturers.
- Technological integration
The retail trade’s digital transformation has heightened the sector’s vulnerability to cyber threats, with vital incidents reported to the Info Commissioner’s Workplace. Retailers face an vital stage of their digitalisation the place they need to implement strong safety measures akin to encrypted knowledge storage, common audits and cross-company worker coaching applications to safeguard delicate info and keep client belief.
As mentioned earlier on this article, the influence of AI in customer-facing areas throughout 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 understanding a lot about AI, regardless that 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. Based on Mintel’s Digital Lives of Shoppers Report, over three-quarters of UK shoppers agree that firms 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 optimistic expertise.
Innovate within the Retail Market with Mintel
Trying forward, the way forward for retail lies in cautious adaptation. Whereas technological developments provide thrilling potentialities, the tempo of change should align with client consolation. Moreover, the rising curiosity within the round financial system and sustainable practices presents a major alternative for retailers. By embracing these developments, manufacturers can showcase their dedication to environmental accountability and construct stronger, long-term relationships with shoppers. Financial downturns undoubtedly result in savvier purchasing habits, nonetheless, as client confidence and disposable revenue rise, a promising path lies forward for the retail trade.
Curious the place your model stands in opposition to the UK’s prime retailers? Our Retail Rating Report 2024 delivers a deep dive into the previous yr, analysing:
- Sale densities: Establish prime performers and benchmark your individual gross sales technique.
- Retailer efficiency: Uncover key developments and improvements shaping the market.
- Class breakdowns: Achieve insights into particular segments driving the UK retail panorama.
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