Bad weather means a stormy outlook for retailers

The month of July cast a large shadow over the retail sector according to last months’ ONS sales data, leaving many retailers reeling after an already tough period of challenges and setbacks. 

As Ian Hepworth, director of Croydon-based Funding Solutions UK notes: “July was a washout for retailers, many of whom are having a brutal time of it right now. The blows just keep on coming.” 

A combination of factors – from inclement summer weather to shifting consumer preferences – has reshaped the retail landscape and ignited a conversation about the future of brick-and-mortar businesses. The school holidays for example, often a time of increased foot traffic and bustling stores, have potentially contributed to the dismal figures.  Families seeking warmer climes have taken their holidays and their spending power overseas. While this might provide some relief on the inflation front, retailers find themselves grappling with diminished revenue streams.

Here is what SMEs at the frontline and industry experts have to say:

July saw rising numbers of users searching for second-hand items. Our organic traffic increased by 29% and retention has gone up by 18%. 

As the cost of living crisis continues, items available for free online remain popular and so far in August we have seen an uptick in activity on our “for free” partner sites such as Freegle and Trash Nothing, with searches for back-to-school items such as winter coats and football boots becoming prominent. 

We are expecting the fourth quarter to be big for us as people plan how to spend a limited budget for the Christmas period. Preloved presents such as books and game consoles are popular on the resale marketplace with refurbished tech reaching a seasonal high towards the end of the year.

This data should come as no real surprise. This is exactly what tackling inflation looks like in reality. 

By increasing interest rates, trying to limit wage growth and not giving support to counter rising costs in energy and food, people have less money to spend. This lack of spending is exactly what has been engineered to drive down inflation. 

It may be great for government promises but terrible if you’re a small independent retailer.

Blaming the weather for a decline in retail sales is denial. 

The figures show that huge numbers of people have switched to online purchases rather than the high street, mostly for convenience but also due to the fact that, with business rates as they are, bricks and mortar retailers struggle to compete. 

Meanwhile, supermarkets say increased prices are reducing sales, whilst declaring record increases in profits and not passing that on through price reductions. 

Ultimately this data will show the Bank of England that the economy is not booming and the public is not flush with cash. So whilst another base rate increase is expected in September, it should now be just an additional 0.25%.

It’s desperate times for retailers right now. Many are giving up on their hopes and dreams, closing their doors, switching off their online shops for good and moving into full-time jobs. Even big brand names are struggling to maintain their presence on the high streets. It begs the question of how long independent businesses will stay on our high streets. 

While online sales have seen an increase, it is disheartening to see that only certain platforms are reaping the benefits. I understand that any sale is considered a good one, but relying solely on platforms such as Amazon and Etsy may inadvertently add more strain to businesses. The high fees associated with these platforms, coupled with the extended holding periods for payment, up to 30 or even 90 days, can further exacerbate the challenges small retailers are already facing.

Conclusion

In light of the declining sales figures attributed to inflation and the ongoing cost of living crisis in the UK, small business owners find themselves in a state of uncertainty. The challenges posed by these economic factors have left them grappling with tough decisions. At this juncture, all that can be done is to adopt a wait-and-see approach, hoping for a better and clearer economic landscape to win out.

Further reading:

• How to manage your small business through a crisis
• How to manage cash flow during a cost of living crisis
• Create your business continuity plan (with free template)