The UK retail business has navigated a number of intervals of client uncertainty, together with the pandemic and the price of dwelling disaster. Over the following couple of years, the retail business will endure important transformation, formed by evolving client behaviours, technological developments and potential political and financial adjustments.
Be part of Mintel as we offer a snapshot of the UK retail market panorama – together with perception into different international areas – highlighting alternatives, challenges and rising developments that can outline the business’s trajectory within the close to future. For a complete retail business evaluation, masking 18 retail sectors, together with how the ten largest retailers within the UK have ranked in opposition to each other for the previous 5 years, you should purchase our UK Retail Rankings 2024 Report.
Financial Outlook of the UK Retail Business
The UK retail market skilled a second consecutive 12 months of excessive inflation in 2023, resulting in a deal with important gadgets and a difficult surroundings for discretionary classes. Whereas retail gross sales grew in worth phrases, this development masked an underlying quantity decline.
Shifting ahead, Mintel’s retail business insights reveal that the market is predicted to indicate a mixture of conservation and average development, buoyed by rising client confidence and elevated disposable incomes. Nevertheless, the efficiency throughout totally different sectors varies. E-commerce continues to develop, albeit behind the broader retail sector, recording a 3.9% improve in on-line gross sales, pushed by the comfort, variety and worth notion amongst customers. In distinction, brick-and-mortar shops face ongoing challenges, together with diminished foot site visitors and heightened operational prices.
UK Retail Market: Sector Efficiency
The inherent necessity of the grocery sector implies that the demand for this class remained insulated and comparatively secure, even throughout monetary turndowns. In keeping with Mintel’s Supermarkets Market Analysis, the grocery market measurement is predicted to develop to £241 billion in 2028. Nevertheless, this doesn’t imply customers aren’t adopting savvy procuring behaviours in response to the elevated costs, with 73% of UK customers spending extra time in search of the most effective offers in meals shops. Correspondingly, the German meals discounters Aldi and Lidl each secured a spot within the high 10 retailers within the UK.
Whereas grocery demand continued to outpace non-food classes, store-based trend noticed an uptick in quantity development in 2024. This upswing will be attributed to a weaker comparative efficiency in trend retail throughout 2023 and stronger client demand as out-of-home footfall recovered, boosted by over six in ten Era Z and Millennials having purchased garments in-store within the final 12 months. To assist preserve post-pandemic curiosity, a number of clothes specialists are increasing into new classes like magnificence and private care to spice up income alternatives. Main the best way is Marks & Spencer, which has added magnificence retailer Estee Lauder Perfume and launched its personal Contemporary Parts skincare vary to its choices.
As seen throughout different occasions of financial adversity, the “Lipstick Impact” struck once more. Customers, dealing with harder occasions, turned to the retail remedy of magnificence merchandise, indulging in reasonably priced luxuries to brighten a bleak financial image. Magnificence and private care buy exercise stays regular inside the retail market, with 9 in ten UK customers making BPC purchases in-store. Nevertheless, on-line purchases are on the rise, with three-fifths of Brits making on-line BPC purchases. One purpose behind this improve is that customers can learn evaluations and evaluate merchandise freely. Comparable in-store shopping for developments may also be discovered throughout the pond, with two-thirds of Canadian class patrons having made a BPC buy at a drug retailer and nearly seven in ten US People desire to buy in-store, expressing a desire for sampling merchandise earlier than buying.
The upper ticket dwelling classes have struggled in 2023/4, reporting a decline compared to the numerous enhance seen in the course of the pandemic, when the nation had extra time to spend at dwelling because of lockdowns, giving them a chance to finish DIY tasks . The value of dwelling disaster has hampered customers’ discretionary spending and led customers to prioritise spending areas outdoors of dwelling enchancment, leading to a decline in quantity phrases in main dwelling classes resembling furnishings, family home equipment, and DIY. In a bid to diversify, the DIY retail market has shifted their advertising and innovation efforts in direction of smaller ticket dwelling enchancment tasks resembling portray and adorning, to assist customers replace their areas in a budget-friendly nature.
On-line gross sales have settled post-pandemic, with occasional spikes throughout occasions like Black Friday. The proportion of on-line gross sales has stabilised at round 25-27% of whole retail gross sales in 2024. Despite the fact that the expansion of the web market was behind the expansion of the broader retail sector, three-quarters of UK internet buyers say that the most effective costs are discovered on-line, serving to the sector insulate demand with a constructive worth notion.
A full and complete breakdown of 18 retail sectors and main retailers’ efficiency in these sectors, together with Footwear to Meals, and Well being and Magnificence to Homeware and plenty of extra will be present in our full Retail Rankings 2024 Report.
Retail Business Developments and Alternatives
Enhanced client expertise by way of group retail
Retail areas are evolving to supply extra than simply merchandise; they’re turning into group hubs, locations the place customers can have interaction in enriching experiences. This contains creating areas for socialising, studying and internet hosting group occasions, which helps to construct emotional connections between the retailer and client and subsequently improve buyer engagement and loyalty. One retailer that’s efficiently innovating on this rising group retail area is Gymshark. Based in 2012 as an online-only direct-to-consumer (DTC) model, Gymshark opened its flagship retailer in Regents Road, London in 2023. The shop brings Gymshark’s useful health however enjoyable ethos to life by internet hosting experiential components, from one-to-one private coaching stations to in-store Sweat Lessons. This health model’s entry into bodily retail will hopefully encourage brave strikes from different online-first manufacturers to increase into the bodily area, one thing which is crucial for the way forward for the excessive road.
The rise of the round financial system
Client demand for sustainability and round financial system practices is multiplying throughout the UK retail market. As customers grow to be extra environmentally aware, they appear to retailers to guide by instance to supply eco-friendly merchandise and cut back the dimensions of their carbon footprint. One notable sustainable retail business pattern is the rising curiosity within the secondhand financial system. Mintel’s retail business insights report UK Model Overview reveals that two-fifths of customers have bought secondhand merchandise. Even within the US, the secondhand market is predicted to develop, significantly within the smartphone sector, influenced by the notion that smartphone innovation has peaked (alongside the monetary and environmental advantages). Over a 3rd of US People have beforehand chosen to purchase a refurbished telephone, and Mintel predicts this may proceed to rise, particularly amid occasions of monetary turbulence. Manufacturers are inspired to leverage this pattern to construct buyer loyalty, attraction to customers’ money-saving pursuits and reveal sustainability commitments.
One standout retailer who’s innovating on this area is the Finnish model Swappie which launched merchandising machines that permit customers to purchase, promote, or recycle second-hand smartphones, aiming to extend the reuse and recycling of previous telephones. This mannequin gives 24/7 entry and comfort, encouraging round habits amongst customers.
This round observe extends into the trend sector the place nearly half of Germans and 16-34-year-old Brits have purchased secondhand garments. By shopping for secondhand garments, customers can align their environmental values by selling reuse, lowering the demand for brand new manufacturing and contributing to a extra round trend business. The German model Zalando is a good instance of an organization pushing trend into greater circularity. In 2021, Zalando rolled out a care and restore service to interact with customers post-purchase and to assist prolong product life as a lot as attainable. Schemes like this attraction to customers’ heightened deal with eco-friendly pursuits whereas constructing a brand-consumer relationship constructed on belief and longevity.
Purchase your copy of Retail Rating 2024 Report immediately
Expertise adjustments the retail procuring expertise eternally
Staying aggressive within the retail sector requires steady innovation. Because of this a multiplying variety of retailers are introducing tech-driven services to assist entice new clients and improve buyer loyalty. Improvements resembling AI-powered customer support may help observe client preferences and in flip, make real-time suggestions which are personalised to the consumer. An instance of a standout initiative was B&Q and Screwfix’s proprietor Kingfisher who just lately launched the primary AI-powered assistant within the dwelling enchancment and DIY sector. Utilizing generative AI to help clients at dwelling with their DIY tasks, the AI assistant gives step-by-step recommendation on a variety of dwelling enchancment tasks in addition to tailor-made product suggestions. This use of AI completely illustrates how procuring experiences will be uniquely personalised and may help improve total buyer satisfaction.
Challenges for Manufacturers within the Retail Business
- Financial uncertainty and client savviness
Confronted with rising inflation, manufacturers within the retail market have to constantly reveal worth to customers, which can assist alleviate the financial stress forcing cutbacks in discretionary spending. Put up-pandemic, customers have adopted savvy procuring behaviours and grow to be extra value-conscious, typically in search of the most effective costs by way of on-line analysis and social media evaluations. Since Mintel predicts that this pattern is more likely to persist, retailers might want to deal with offering aggressive pricing and worth propositions resembling specializing in effectivity, multifunctional merchandise with long-lasting claims, loyalty schemes and trial choices.
- Ongoing provide chain points
Mintel’s Retail Rankings 2024 Report outlines that provide chain resilience stays a crucial situation for retailers. Greater than half of retail executives are involved about provide chain disruptions impacting their operations in 2024/25. These disruptions are attributed to components resembling geopolitical instability, logistical challenges, and uncooked materials shortages. Rising prices and provide shortages will proceed to problem each the retailer and the patron since elevated operational prices restrict retailers’ capability to guard costs for the patron. To mitigate this problem, retailers have to implement superior provide chain analytics to help sustaining provide, along with diversifying suppliers by supporting native manufacturers.
- Technological integration
The retail business’s digital transformation has heightened the sector’s vulnerability to cyber threats, with important incidents reported to the Info Commissioner’s Workplace. Retailers face an vital stage of their digitalisation the place they need to implement strong safety measures resembling encrypted information storage, common audits and cross-company worker coaching packages to safeguard delicate info and preserve client belief.
As mentioned earlier on this article, the influence of AI in customer-facing areas inside the retail market is rising quickly. Nevertheless, the tempo at which retailers plan to leverage AI capabilities is outpacing client consciousness, with practically a 3rd of customers not understanding a lot about AI, although they’re conscious of the time period. Whereas there’s nonetheless scepticism and distrust from customers round AI, manufacturers should resist the temptation of accelerating the adoption course of and as an alternative strategy it with warning and set up clear communication when AI is used. In keeping with Mintel’s Digital Lives of Customers Report, over three-quarters of UK customers agree that corporations ought to make it clear when interactions contain AI. These findings reveal a want for manufacturers to be clear and upfront about AI involvement, which ought to assist manufacturers handle client expectations and foster belief for a extra constructive expertise.
Innovate within the Retail Market with Mintel
Trying forward, the way forward for retail lies in cautious adaptation. Whereas technological developments supply thrilling prospects, the tempo of change should align with client consolation. Moreover, the rising curiosity within the round financial system and sustainable practices presents a big alternative for retailers. By embracing these developments, manufacturers can showcase their dedication to environmental duty and construct stronger, long-term relationships with customers. Financial downturns undoubtedly result in savvier procuring habits, nonetheless, as client confidence and disposable revenue rise, a promising path lies forward for the retail business.
Curious the place your model stands in opposition to the UK’s high retailers? Our Retail Rating Report 2024 delivers a deep dive into the previous 12 months, analysing:
- Sale densities: Determine high performers and benchmark your personal gross sales technique.
- Retailer efficiency: Uncover key developments and improvements shaping the market.
- Class breakdowns: Achieve insights into particular segments driving the UK retail panorama.
Achieve a aggressive edge and buy your copy of our UK Retail Rating Report 2024 immediately!
Discover our intensive vary of Retail Market Analysis, or fill out the shape beneath to enroll to Highlight, Mintel’s free e-newsletter for unique insights.
