UK Retail – where are the key opportunities for 2023?

Many retailers entered the Golden Quarter cautiously – with news headlines setting expectations for a challenging trading environment. However, as we finish the first month of 2023, the picture appears much more positive.

Since the start of the year, 81% of occupier trading statements tracked by CBRE have been positive. ONS also reported encouraging December sales figures – values +13.3%, and volumes* only -1.4% vs 2019. Clothing and Footwear performed remarkably well, with sales values +12.7% and volumes +2.2% vs 2019. Luxury and Jewellery occupiers have also continued to see strong performance. Moreover, physical retail remained resilient. In December 2022, online penetrations fell to their lowest point since the start of the pandemic.

However, not all indicators are signalling a positive trajectory. Despite steady improvements in Q4 2022, GfK’s consumer confidence declined to -45 in January, near historic lows for this metric. Additionally, the Centre for Economics and Business Research recent findings show that six in ten households have now spent all their savings to ‘maintain their lifestyle’.

As such, we expect competition for consumer spend to remain strong in the year ahead. Below we discuss some of the opportunities for occupiers in 2023:

Leveraging Store Networks

A notable theme from the positive trading statements has been the revival of the in-store sales channel – with some attributing postal strikes as the driver. Meanwhile, half of the negative trading statements tracked by CBRE were from online-only brands.

In 2023 we expect stores to continue to drive performance. Our Global Live-Work-Shop Report highlighted consumers prefer to shop in-store for seven out of ten product categories, and seeing the product was the key reason listed for this preference. As disposable incomes remain squeezed, consumers will continue to place more emphasis on the quality of their purchase and will visit physical retail locations to help to validate this. The store network can also offer occupiers other benefits such as spin-off online sales or reducing return costs.

Prioritising Consumer Experience

Following two years of restricted socialising during the pandemic, consumers have craved opportunities for in-person experiences. Throughout December 2022, the number of table reservations recorded in the UK by Open Table were 30% ahead of 2019. 

However, our research discovered that consumers are most likely to reduce their spending on dining out and leisure activities when they feel less positive about their personal finances. Occupiers will need to work hard to entice consumers to spend their money. Those who deliver truly unique experiences, with strong levels of service, will be the best positioned to overcome the current economic downturn.

Maintaining ESG Focus

Our research found that 68% of consumers are more aware of the environmental and societal issues facing the planet than they were pre-pandemic. In the last few years, many occupiers have begun to strengthen their ESG credentials, either by utilising recycled materials in product lines, or introducing rental concepts to their business model.

As margins come under pressure in 2023, it may be tempting for occupiers to push ESG enhancements down the priority list. However, with 26% of consumers reporting that they have stopped shopping at a particular brand because of their environmental or societal stance, this is a topic which occupiers must continue to prioritise to retain market share.

Preserve International Spending

In 2022, international tourism levels rebounded. By November, hotels in England were 78% occupied, in line with 2019 levels, according to Visit Britain.

Pre-Brexit tax-free shopping drew in international spend. Meanwhile, in recent months the weakened pound has certainly been a driver. In the year ahead, occupiers must work to preserve the UK’s position as an international shopping destination. While there are many factors outside occupiers’ control such as the quality of the surrounding infrastructure and leisure attractions, introducing exclusive product lines or in-store experiences for the UK market are some examples which could help to achieve this.

If you would like to discuss the opportunities for UK retail in more detail, please don’t hesitate to get in touch with our team. 

* Sales volumes consider the count of products sold, removing the effect of inflation.