The last few weeks have seen publication of the latest monthly UK Retail surveys plus some significant individual trading updates. What does this recent data tell us about the state of UK Retail

1. The various UK Retail surveys are unusually uniform in painting a dark picture

As the various key surveys are derived from completely different sources (and can even be extremely inconsistent month on month with both themselves and each other) it is significant how constantly downbeat the current surveys are:

• Retail sales volumes flat year on year in July 2011; Office for National Statistics
• Retail sales volumes fell year on year in August 2011 and at the fastest pace since May 2010; Confederation of British Industry
• Sales fell 2.2% on a like for like basis in August 2011 which was the worst year on year fall since 2009; BDO High Street Sales Tracker
• Retail sector’s sales performance in August 2011 was flat; British Retail Consortium
2. The gloomy picture is borne out by three recent trading updates from leading UK Retailers
• Argos – this is traditionally a bellwether Retailer and their like for like sales (ie. sales generated from stores opened both in 2011 and 2010 and therefore excluding new stores) were down 9% in the 13 weeks to 27 August 2011
• Dixons (including PC World and Currys) - like for like sales were down 10% in the 12 weeks to 23 July 2011. Their “excuse” that their sales were up against strong comparatives last year does not sound very convincing given the state of UK Retail this time last year
• Morrisons – like for like sales were up 2% but this was over a six month period to 31 July 2011 and it may well be that like for like sales were worse on a weighted average basis towards the end of the period reported upon
3. Are there any chinks of light?

It’s hard to see too many but shoppers are really focusing in on product “value”. Consumers still have to make purchases however dire the economic outlook seems and “value” is only partially about being the cheapest and more about being considered value for money. The Retailers that can best communicate that they are achieving this to their core customers will continue to take market share from the competition in a largely static Retail sector

4. What else should Retailers do to preserve the bottom line in troubled times?
• Continue to review cost bases; although a lot of this has already been done
• Work smarter; largely IT-driven. Morrisons talked in their trading update about a £310m investment programme to replace all their IT systems by 2013/14 thus delivering £100m of annual savings. The same principle (putting to one side the size of the Morrison numbers themselves) can and should be applied by smaller Retailers
• Hold on to existing customers; the cost of attempting to recover lost footfall retrospectively will always be far greater
• Focus on the Internet offer to maximise the number of channels to market. Despite the high street gloom, e-commerce continues to flourish according to the above surveys

Each of the four trading statements talks in various ways about commitment to customer service. Perhaps Retailers are beginning to belatedly realise that the customer cannot be taken for granted and (in a climate where every Retailer appears to be permanently “on sale”) actually caring for the customer can be a better way of differentiating from the competition. However talk is cheap and it will be interesting to see which Retailers in these financially straitened times are prepared to invest significantly in Customer Services departments and Store Staffing to effectively back up these words!