UK retailers predict growth despite economic challenges ahead
After a challenging few years marked by the devastating impact of the Covid-19 pandemic, significant inflation, and other economic headwinds, the UK retail sector anticipates a resurgence, according to new findings from Fluent Commerce. The survey highlights optimism among retailers, with 93% expecting business growth over the next year, and 86% maintaining a positive outlook for 2024. This optimism follows the UK's emergence from recession earlier this year, along with falling inflation rates.
Despite this positivity, retailers still face a variety of challenges. A considerable 54% of respondents identified the ongoing cost of living crisis as their biggest hurdle. Recent supply chain disruptions, including attacks in the Red Sea, have also heavily impacted businesses, with 75% of retailers affected and 7% labelling these disruptions as severe. Additionally, technology adoption stands as a significant obstacle for 42% of retailers, highlighting the need for substantial investment in new technological solutions, particularly artificial intelligence (AI).
The report reveals that at the Retail Technology Show, over 100 retail professionals expressed optimism for the future. A significant 93% anticipated business growth within the next year, with 39% forecasting substantial growth. Only 1% expected a loss in 2024. This contrasts sharply with the disappointing start to the year, where Covid-19 aftershocks continued to affect consumer spending, despite easing inflation. Stagnant Q1 sales figures from the Office for National Statistics had cast doubts on the industry's recovery.
Rob Shaw, SVP and GM EMEA at Fluent Commerce, noted that economic pressures have made managing costs and operational efficiency a top priority for retailers. However, Shaw expressed confidence that the industry is on the brink of a long-awaited revival. The survey's findings emphasised that recent supply chain disruptions have been a significant headache, particularly the disruptions caused by attacks in the Red Sea. Nearly half of the retailers surveyed cited stock unavailability online and limited stock in physical stores as major issues resulting from these disruptions.
To counteract these challenges, many retailers are taking steps to build supply chain resilience. The survey found that 38% of businesses are actively working to make their supply chains more resilient, with 44% diversifying their suppliers and 39% sourcing goods locally. Although 15% had not yet explored different sourcing or fulfilment options, they indicated they might do so if disruptions continue.
Investment in new technology remains a top priority for many retailers, with the survey indicating that 42% are struggling to keep up with the rapid pace of technological advancements. Key concerns include delivering a seamless omnichannel experience and implementing AI. Additionally, a quarter of respondents admitted to lacking real-time inventory visibility, underscoring the need for enhanced technological solutions. Shaw highlighted that the correct use of technology not only helps businesses predict and react to changing conditions but also provides a competitive advantage.
Looking ahead, investing in new technologies emerged as the leading strategic priority for 70% of respondents over the next five years. Other priorities included investment in product innovation (44%), sustainability initiatives (40%), and expansion into new markets (30%). As the retail sector braces for a revival, the emphasis on technology and operational efficiency will likely drive the industry's growth and resilience in the coming years.
