Outlook encouraging for retail in 2015 and 2016

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Outlook encouraging for retail in 2015 and 2016

  • Boost for Dutch retail volumes
  • Overcapacity and price pressure: still structural problems
  • Need for decisions from retailers

Revenues and volume movements stabilising

The retail sector is looking at growth once again. Following years of economic downturn, volumes will once again begin to rise. The clothing segment – traditionally highly sensitive to economic developments – can benefit, although price pressure will remain high as a result of the excess of clothes shops on the Dutch market. The recovery of the housing market is boosting volumes of DIY shops and furniture and interior shops. This is ABN AMRO’s conclusion in its Vision on Retail 2015, published today. In 2014 volumes on the market for consumer durables rose marginally, by 1 percent, and the 0.9 percent drop in prices virtually cancelled this out. On balance revenues remained almost unchanged relative to the previous year. Consumer electronics shops saw their volumes increase by 7 percent, boosted by generally larger sellers (particularly online). However, with prices falling almost 4.5 percent only around 2 percent revenue growth remained. Nevertheless, this represents a significant improvement from 2013, when revenues dropped 8.5 percent.

Online retail not slowing down

The ongoing rise of online retail is affecting the entire sector. While revenues in retailers’ brick-and-mortar shops fell 7 percent between 2008 and 2014, online revenues were up 134 percent. Online spending now represents almost 7 percent of all retail expenditure, though this proportion is much higher for non-food retail, owing to a rapid increase in online purchases in some product groups. For example, almost a quarter of all expenditure on toys is online, while for clothes this proportion has climbed to around 15 percent. For food retail this is only 1 percent, despite a doubling in 2014. At the same time sales in brick-and-mortar shops fell, causing a high degree of overcapacity and putting pressure on prices. The influence of online retail varies significantly across the sector. The largest growth lies in segments where the shift to online has only recently begun, ABN AMRO believes.

Consumer expectations: retailers must be smart

Technological innovations and the role of the Internet are changing consumer preferences at a rapid pace. ‘Consumers expect retailers to be smart and continually cater to the changing preferences for personal approach, unusual and preferably unique product ranges, speed and service. Not all retailers can deal with this. It is important for them to make clear choices and use their product range, their approach to their targeted market and inspiration to stand out from the crowd. The role of brick-and-mortar shops is changing: shops need to inspire, not simply serve as a place for displaying goods. It is important to find the right mix of offline and online, service and price for each location in order to improve revenues,’ explains Chris Meijers, Sector Banker Retail at ABN AMRO.

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