Retail Industry in the UK for the Last Quarter of 2011 Essay

Retail Industry in the UK for the Last Quarter of 2011 - Essay Example The UK retail sector contributes 8% towards the country’s GDP which includes the UK retailers going overseas and expansion of e-commerce beyond the borders of the United Kingdom (Farfan, 2011). However, retailers in the UK face a huge challenge as they struggle to cope with the sudden deterioration in consumer demand and willingness to purchase. This report presents an in-depth analysis of the key factors that influence the development of the retail sector while evaluating which sectors offer the most potential. 2. Overview of the retail sector 2.1 Top retailers - UK The top four retailers in the UK include Tesco, Asda, Morrisons and Sainsbury and together they account for about 80% of the retail food sales in the UK (Farfan, 2011). Even though recession impacted the individual retail chains, there were not many substantial changes in the largest retail UK chains. The largest retail chains held their ranking order because there were no changes observed. Two major changes that occurred in 2011 in the UK retailing industry were that the apparel retailer Arcadia group and department store Debenhams lost their spots in the World’s largest retailing list completely. ... 2.2 Causes of decline in consumer shopping The retail sector witnessed a healthy start to 2011 as figures showed that sales on high street were up 9% year-on-year which provided a new boost to the British mid-market retailers (Sillitoe, 2011). Fashion sales, non-fashion trading and homeware sales had all witnessed growth in sales. However, the economic and survey data suggest a slowdown in activity, which poses a challenge for the UK retail sector. Following the recession the economic growth has been slow which reflects the weak consumer sector and the rising unemployment. The economy is expected to grow by 2.0% in 2012 but the retail sector continues to be grim (Retail Economics, 2011). Consumer spending had fallen for four consecutive quarters before September 2011. Consumer spending in the second quarter of 2011 declined by 1.7% compared with the same period last year. Real disposable incomes have been affected due to high levels of inflation and low earnings growth. Besides, taxe s have been imposed and benefits cut, which further affects the household disposable income. Fears about job security and personal finances have contributed to low consumer spending. The consumer spending is expected to slow down further as consumer debt rises, assisted by rising interest rates and inflation (Prospects, 2012) and stagnant wage growth and rising unemployment (Leach, 2011). House prices and job security also affect how people shop. Consumer confidence has waned because people will shop only if they feel optimistic about the situation. When they lack confidence in their own financial security, naturally the spending will be reduced. There has been a slow growth in the retail sector as the operating costs and the cost of credit have risen. The