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Sector Analysis

Polarisation in the retail sector suggests there will be casualties in Q1 2014

By CreditMan Monday, December 2, 2013

Months of work to keep sales moving without sacrificing margins has left the high street well positioned as Britain's retailers prepare to trade blows in the first truly digital Christmas shopping season.

BDO's monthly High Street Sales Tracker figures released today on 'Cyber Monday' – the unofficial beginning of the online Christmas shopping season – show overall like-for-like high street sales in November grew 1.1%.

Fashion sales recorded the first positive growth since April (up 0.4% year-on-year), with non-fashion up 2.5% and homewares receiving a pre-Christmas boost of 5.8% as people splashed out on big ticket items to help them cope with a sudden influx of festive guests.

November's strong sales stemmed from shoppers' pent up demand during the wet and mild October. Careful targeting through referral discounting schemes, rather than the across-the-board reductions used in previous years, helped protect margins as shoppers splashed out on themselves before Christmas.

Don Williams, National Head of Retail and Wholesale at BDO LLP, said November reflected a cautious growth seen throughout the year, but December would be defined by online sales in a way never seen before.

"The strong growth in online shopping that we've seen so far this year – digital sales were almost 30% higher year-on-year in November – is being driven by a couple of major structural changes," he explained. "M-commerce is about to hit a tipping point and sales via tablets and smartphones will overtake desktop sales before the end of the year. The rise of collection lockers and 'send to store' options means this will be the year of 'click & collect' too."

While predicting "a very happy Christmas" for retailers that manage logistics and in-store collection points to cope with the demand, Williams also sounded a note of caution.

"Competition is extremely fierce and although the overall year-on-year average suggests modest growth, the high street remains polarised. The retailers with the products people want and the channels to supply them quickly can hold back on discounts and protect their margins.

"The rest may be forced to tactically discount in an attempt to get sales moving. With things so perilous, we expect to see a couple of casualties early next year."