Retail Closures Inevitable but Online Thrives

Two new reports from Datamonitor and Verdict Research on the retail sector predict more store closures but say casualties will provide an opportunity for survivors. A further Verdict study, meanwhile, reveals online retailing is showing no signs of slowdown with shopper numbers and spending at an all-time high.

Datamonitor’s survey of consumers in Australia, Canada, the UK and US, found 78% of respondents across the four countries expect “lots more shops to close down”.

British shoppers are the most pessimistic, it says, with 89% of respondents agreeing with this statement.

“These findings are profoundly worrying for the retail industry,” said Neil Hendry, Datamonitor’s global director of consulting for consumer markets. “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 go out and spend in the short to medium term.”

But new research from Verdict estimates retail casualties will provide a total of £3.9bn opportunity for survivors. However, the majority of this will be in non-food sectors such as clothing and furniture – the two sectors most affected by the banking crisis.

There will be less opportunity in food and grocery, since only the demise of Woolworths has produced any significant share up for grabs.

Datamonitor’s research also suggests local stores will benefit from retail closures elsewhere.

According to the survey, 45% of respondents will start to buy more form local stores to support local businesses and 56% believe their local shopping malls and high streets would be unaffected by mass retail closures.

“This is an interesting dynamic,” said Hendry. “The lack of diversity in shopping malls and high streets across Australia, Canada, the UK and the USA, 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 USA, means that the future viability of the “city fringe” retail park or shopping mall may be called into question.”

In a separate study, Verdict reports online retailing is storming ahead despite recession. It reports online spending by consumers on retail purchases will be rise by 13.3% in 2009 to £20.9bn and online retail is forecast to account for 10% of total spending by 2013.