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    Consumers View More Retail Closings as Inevitable: Survey

    The retail landscape across Australia, Canada, the United Kingdom and the United States will undergo more changes before economic conditions improve, according to consumers polled as part of independent market analysis firm Datamonitor’s “Recession and Recovery Research Programme,” which offers a current view on the impact of the recession on consumers and business across 19 countries.

    The retail landscape across Australia, Canada, the United Kingdom and the United States will undergo more changes before economic conditions improve, according to consumers polled as part of independent market analysis firm Datamonitor’s “Recession and Recovery Research Programme,” which offers a current view on the impact of the recession on consumers and business across 19 countries.

    Results from the survey, which was conducted online May 30 and May 31, and based on a sample of 1,200 consumers across Australia, Canada, the United Kingdom and the United States, found that 78 percent of respondents in the four countries believe “lots more shops will close down.” British shoppers had the bleakest outlook regarding closures, with 89 percent of U.K. respondents mostly agreeing with this statement.

    In contrast, just under 15 percent of respondents in the four countries thought more new shops would open during the recession.

    “These findings are profoundly worrying for the retail industry and also for the commercial property sector,” noted Neil Hendry global director of consulting for consumer markets at London-based Datamonitor. “As we know, consumer spending is under pressure globally, and the fact that consumers see more retail stores and chains closing would suggest they are pessimistic about their ability to be able to go out and spend in the short to medium term.”

    The survey results also indicate a potentially bigger shift in consumer retail spending behaviors. Forty-five percent of respondents said they would start to buy more from local stores to support local businesses, and as a result, 56 percent believed their local shopping malls and areas would be unaffected by mass retail closures.

    “This is an interesting dynamic,” observed Hendry. “The lack of diversity in shopping malls and high streets across Australia, Canada, the U.K. and the U.S.A. has increasingly been a source of frustration for consumers, and it would appear that the economic downturn has created an environment where a sense of community can be shown through support of local businesses. This trend is also underpinned by increasing awareness of environmental and local sourcing issues amongst consumers, which, combined with a reduction in car usage, particularly in the U.S.A., means that the future viability of the ‘city fringe’ retail park or shopping mall may be called into question.”

    Unsurprisingly, in all surveyed countries, consumers thought the weaker and less popular retail stores would be unable to withstand the recession, but there was a significant difference among countries as to how stores will cope with the effects of the downturn to increase their chances of survival. In the United States, for example, 59 percent of consumers believed stores would open for less time to control staffing costs, an opinion shared by just 20 percent of Australians. In the United Kingdom, meanwhile, 58 percent of consumers thought stores would stay open longer to maximize trading opportunities, vs. only 26 percent of Canadians.

    “Obviously, there are differences across these four economies already in terms of opening hours, and also in terms of retail cost structures,” said Hendry. “However, what the above would indicate in the U.S.A. is a reduction in overtime hours for staff, and possibly retrenchment of part-time jobs in retail, which could have a particularly adverse effect on working families and also students, who often rely on retail work in order to support their incomes. In the U.K., with lease payments due quarterly in advance, retailers will obviously be looking to maximize sales. The key equation will therefore be whether extra staff and overhead costs will be covered by improved cash flow or the margins achieved on incremental sales.”

    According to Hendry: “the most worrying thing from an overall economic perspective is that consumers are pessimistic about the retail sector -- indicating they are also pessimistic about their own ability to spend. This means any consumer-led economic recovery is going to be some way off, particularly as unemployment rates look set to continue to rise significantly over the next 18 months. As such, the outlook for commercial and retail property will remain very weak, particularly with regards to portfolios that are not well served by public transport, and will ensure that default rates amongst the major banking groups exposed to commercial property will potentially also increase -- placing even greater pressure on fragile lending markets.”

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