In a recent talk at ASK BOSCO Live®, our annual event for business leaders, Don Williams, Partner at KPMG, shared valuable insights into the current economic landscape, retail trends, and consumer behaviour. Drawing from over 30 years of experience working with retailers, Don gave his perspective on how businesses can tackle the challenges and opportunities in today’s economic climate.
2024 retail trends and current economic landscape
TL;DR: Don highlighted the stagnant economy and the slight growth in wage rates outpacing inflation. Consumers are spending more on experiences rather than retail, with online shopping stabilizing post-pandemic. Key retail categories such as health and beauty remain resilient, while value sector success hinges on operational efficiency. Many consumers face financial stress, with a shift to own-brand products and increased use of buy now, pay later services. Don emphasized the importance of innovation and disciplined execution for businesses to thrive in this challenging landscape.
Key Takeaways from Don’s talk:
1. 📉 Economic Outlook:
– Stagnant Economy: The economy remains sluggish, with minimal growth observed. While recent data shows a slight uptick, overall progress is slow.
– Inflation and Wage Growth: Inflation is now under control, and wage growth has surpassed inflation, providing a slight relief to consumers.
– Interest Rates and Employment: Interest rates have peaked and are expected to decline, albeit not to previous lows. Employment remains historically high, offering stability in the job market.
2. 💳 Consumer Spending Patterns:
– Shift to Experiences: There is a notable shift from retail spending to experiential spending. Consumers are prioritizing experiences over physical goods.
– **Online Penetration:** Online retail experienced a significant boost during the pandemic, followed by a plateau. The balance between online and offline shopping varies by category, with a trend towards stabilization and gradual increase.
– **Price vs. Volume:** Retail spending growth has been driven by price increases rather than volume, indicating consumers are buying less but paying more for essential items like food.
3. 🛍️ Resilient Categories and Trends:
– Health and Beauty: These categories have shown resilience, particularly at the luxury end.
– Value Sector: While value retail remains strong, operational efficiency is crucial for success, as exemplified by the failure of Wilko despite the sector’s overall resilience.
4. 📊 Consumer Insights:
– Financial Concerns: Many consumers are worried about food costs and lack significant savings, with 50% having less than three months of income saved.
– Own Brand Preference: There’s a shift towards own-brand products, especially in food and clothing, though interestingly, not as much in pet products.
– Buy Now, Pay Later (BNPL) : The use of buy now, pay later services has increased by 20% year-on-year, raising concerns about potential debt issues.
5. 🚀 Strategic Opportunities for businesses:
– Innovation and Execution: The key to success lies in innovation and disciplined execution. Businesses must leverage their unique strengths, whether in digital marketing, distribution, or customer engagement, to stay competitive.
– Monetizing Capabilities: Companies should explore monetizing their capabilities beyond just product sales, such as through strategic partnerships and ecosystem expansion.
Don emphasized that despite the challenges, there are still opportunities for businesses who innovate and execute effectively. Drawing inspiration from Roger Federer’s career, he highlighted the importance of persistence and resilience in achieving success in the competitive retail landscape.
To find out more insights from Don’s talk, please watch the video below.
