The UK nonfood retail sector can benefit from the demise of weaker operators to maintain growth for the survivors, according to data and analytics company GlobalData.
The company estimates at least £1.5bn will be released by failing retail businesses in 2018 with just three of this year’s casualties, Maplin, Toys R Us, and Poundworld, freeing up around £1.4bn of consumer spending for competitors to grab. And this does not take into account sales from store closures such as House of Fraser’s shrinking portfolio.
The company estimates at least £1.5bn will be released by failing retail businesses in 2018 with just three of this year’s casualties, Maplin, Toys R Us, and Poundworld.
‘‘While these sales will not go immediately to competitors, they will certainly benefit in the crucial Q4 sales period,’’ comments Maureen Hinton, global retail director at GlobalData. ‘‘The money consumers spent at these retail failures does not disappear, but is recycled for the benefit of others in the market, which is essential when there is so little overall retail growth.’’
This is not a new phenomenon. At the beginning of the financial crisis in 2008, according to GlobalData, £4.7bn was released from failures including Woolworths, MFI, and major footwear specialists. Another £3.5bn was released in 2009.
The underlying problem for UK retailers, according to GlobalData, is overcapacity. Along with other mature western retail economies, demand is maturing and growth is slowing, and this is a major factor in the death of the weaker operators, particularly nonfood retailers where the majority of products are nonessential.
GlobalData forecasts that the nonfood sector will grow by 1.4% in 2018, increasing by an additional £2.6bn spend, but the spend redirected from casualties will boost survivors’ growth and help the most successful retailers to outperform.
‘‘The result is that the survivors in the market are living off the remains of consumer expenditure that would have been spent at those casualties, helping survivors to maintain growth and take share,’’ Hinton adds.