Retail Sector Battles Market Conditions

11 December 2010

The retail sector faces many challenges looking ahead to 2011 with the increase in VAT to 20% and the anticipated impact of Government spending cuts grabbing most of the recent headlines.  However, the retail market in Northern Ireland is extremely diverse with many  complex issues making it difficult to predict the year ahead.

Firstly, the expectation is that the run-up to Christmas this year will be virtually on a par with recent years as the consumer focuses on enjoying the festive season. I expect cross-border trade will again peak during the Christmas period focusing firmly on the food and drink sectors with limited spend beyond these categories. Clearly, the Irish economy is going through the slow and painful process of adjusting to a reduction in living standards, which will result in more competitive pricing for consumers. Such a process, however, is likely to take several years and, in the meantime, I think that shopping north of the border will remain an attractive proposition for Euro shoppers.

The concern for all involved in the retail sector is what the retail climate will be like going into 2011 once the post-Christmas sales subside.  VAT will increase to 20% and while most retailers will try to absorb this in order to remain competitive, the expectation has to be that consumer sentiment and therefore levels of expenditure will contract due to the Government budget cuts and the resultant reduction in consumer confidence.  Add to this, concerns over bank support for the retail sector and a dramatic worldwide increase in the cost of cotton, which will undoubtedly drive up the cost of clothing, and you can see the difficulties that lie ahead.

During 2010, Belfast City Centre attracted new names as White Stuff, Cotswold Outdoor, Paperchase, Guess, Blacks Outdoor and Liverpool FC to name a few.  All in all, not a bad performance considering market conditions.  Belfast City Centre will also have the added benefit of the improved public realm upon completion of the Streets Ahead project scheduled for March 2011.

Retailers who have performed well during 2010 include discount retailers such as Poundland, B&M, Poundworld and new entrant, Home Bargains.  High Street fashion retailers including New Look, Peacocks and Primark have also had a relatively good year and although they have good representation across Northern Ireland, will continue to expand their operations over the coming year. The food sector continues to perform robustly albeit within an extremely competitive environment with multiples including Sainsbury’s, Tesco, Asda and Lidl seeking opportunities for expansion.  Similarly, the convenience food sector is holding up well with operators, Mace, Centra, Cost Cutter, SuperValu and Spar performing well.

We will probably see current vacancy levels in many of the town centres and shopping centres across the Province prevail during 2011 with only the strongest retail centres such as Belfast City Centre, Londonderry, Newry and Ballymena in a position to move forward due to their position within the retail hierarchy.  It is these centres that are best placed to attract new retailers and clearly, Belfast as the regional centre for Northern Ireland will be the focus of most activity.

There is no doubt that times are difficult and very competitive for retailers.  More so than ever the need to control cost, offer value, a point of difference and adapt quickly to market trends will be vital for survival let alone making a profit.  By its very nature, retailing attracts entrepreneurs and therefore many will be able to adapt and focus activity to chart a path through these turbulent times.  Unfortunately, as we have seen in recent previous years, there will be casualties both within Northern Ireland and on a UK- wide basis and I suspect that we will see more of the same in 2011. Undoubtedly, the retail market in 2011 will continue to be turbulent and will require clear vision, bold decision making and above all else determination in order to survive.

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