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Fast Forward: Accelerating changeRetail Trends Briefing 2017January 2017

Retail Trends Briefing 2017© 2017 Deloitte LLP. All rights reserved. 2@iandgeddes #RetailTrends2017

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Agenda

Retail Trends 2017

Christmas update

Welcome and introduction

The High Street in 2017


Christmas update


2016A surprisingly good year for consumers and retailers

Disposable income growth has been strong

despite the recent rise in

inflation

2016 saw the strongest growth in consumer

spending for nine years

(Source: Oxford economics)

Retail sales were very strong – the third quarter in

particular saw the strongest growth in almost two years

Continued fall in unemployment and decent wage growth


Smaller stores and independents outperformed

The grocers bounced back

Tourist spending rose by 22% providing a boost to clothing and luxury goods sales

Channel shift continued with lower footfall instore offset by more traffic online

Biggest Black Friday ever got Christmas off to a strong start

Record discounting pre and post Christmas

Christmas 2016 – a very merry Christmas!


Christmas update

The numbers are in


Sectoral analysis

Christmas update

Home & DIYElectricals

+5.1%-5.2%

Growth across main constituent categories: DIY,

Furniture but slight decline in floorcoverings.

Driven by volume and value sales

decline in household

electricals. Digital products saw

strong growth.

Source: ONS December results non seasonally adjusted

Department stores

+6.8%

Once again department

stores delivered a strong

performance thanks to their

focus on multichannel and

experience.

Food & grocery

+3.9%

Grocers bounced back with value

and volume growth due to a

focus on availability and

execution.

Clothing & footwear

+1.5%

Further polarisation in

clothing while the middle was squeezed.

Footwear also strong.


Food & grocery

-3.4%

Home & DIY

Who were the winners & losers?

Christmas update Please note these numbers are not audited, not reported for the same periods and therefore

have to be treated with caution

*Total sales** Online sales

Clothing & footwear

Department storesElectricals

Christmas period

like-for-like 2016 v.

2015

0%

+14.9%*

+0.6%

+7.2%

+16.6%

+2.9%

+2.8%

+0.1%

+2.2%

+0.7%

+17.9%*

+10.0%*

+2.3%

-3.5%*

+10.0%*

+7.5%

+0.3%

+2.7%

+5.0%

+0.2%

+7.9%*

+16.0%

+11.6%

+15.0%

+2.5%

+2.0%

-1.6%

+40.0%

+18.0%**

+8.9%**

+11.0% +7.0%

+6.0%

-2.9%

+1.4%

+28%**

AO

Argos Dixons

Maplin

GameMatalan

Bonmarché

Next

M&S

FatFace

Jigsaw

Reiss

Primark

SuperGroup

BouxAvenue

Ted Baker

Burberry

Asos

Fortnum & Mason

Aldi

Lidl

Majestic Wine

B&M

Morrisons

Nisa

Waitrose

Sainsburys

Tesco

M&S

Sofa.com

Halfords

Robert Dyas

Topps Tiles

Dunelm

John Lewis

Debenhams

House of Fraser

Selfridges

Amazon


What characterised the winners this Christmas?..

• Seamless customer service across channels

• Clear focus on brand values

• Pure play scaling rapidly


Retail trends 2017


2017 outlook – Troubled times head

Rising cost pressures signal more challenging times for UK retailers in 2017

National Living Wage

FXBusiness

ratesCommodity

pricesPension

costs

Equivalent to c.

6% rental

increase in

London

Equivalent to

between 2-4%

increase in total

wage bill

GBP down c.

15% against

USD and c. 10%

against EUR

IMF projects

10% commodity

price increase in

2017

Increases in

deficits expected

to continue into

2017

Potential for a 300bps to 500bps fall in operating

margins in a number of retail subsectors


2017 outlook – Troubled times aheadPressure on consumer spending set to increase

• Consumer disposable incomes will come under pressure.

• Consumers have already been dipping into savings…

• And borrowing more.

• Therefore we expect a shift away from discretionary spending.

-4

-2

0

2

4

6

8

% Growth in Average Wages vs. CPI Inflation(Source: ONS)

UK CONTRIBUTIONS TO CPI INFLATION: ALL ITEMS NADJ

UK AWE: WHOLE ECONOMY TOTAL PAY - 3 MONTH AVERAGE (%YOY) SADJ

Forecast


2017 outlook – Troubled times ahead

Disruptive impact of technology


2017 outlook - Troubled times ahead…Accelerating change


And the big shift is still to come…

1. E-commerce – the next big thing

• Fastest ever company to get to $100bn in revenue.

• 304 million customers

• Grown margins in the last 10 quarters

• $240bn sales by 2020…

• …and over 50% of US population will sign up to Prime

• Amazon Go – 2,000 stores in US in next 10 years

• $17.8bn sales on 11/11 up 32%

• Including $5bn in the first hour

• Bigger than Black Friday and Cyber Monday combined

Amazon

Alibaba


Experience continues to evolve

2. Store 4.0 - fulfilment, inspiration & friction free

Sonos Nike

Amazon Go True Religion

Inspiration

Convenience


Speak to buy

3. Conversational commerce

A new shopping hub for the smart home

Voice enables in-car shopping


But technology can ease costs pressure

4. The robots have their AIs on the jobs

Next generation warehouse AI managing customer interactions

Flying fulfilment centresDriverless delivery


5. Agile at scale is the new normalImproving innovation, responsiveness and quality of delivery


The high street


Real estate reality checkUnderstanding the true value of space


Marketplace Showcase

The Connected Store

Digital transformation

BenchMarque

Pricing trends analytics

L3

Location, location, location

Markdown

Advanced pricing optimisation

D-Rex

Physical footprint transformation

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Insight

Coming up…

• Retail profitability (February)

• Consumer Review: Digital Predictions 2016 (March)

• Q1 2016 Consumer Tracker (April)

• Q1 2016 CFO Survey(April)

• The Leisure Consumer (April)

• Global Powers of Luxury Goods 2017(April)

Consumer Review: The connected

home

Consumer Review: Redefining customer

service

Tech, Media & Telco Predictions 2017

Consumer Tracker Q4 2016

Retail Showcase: How we can help

you win

Global Powers of Retailing 2017


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