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Summary
- Consumer spending in February dropped 13.8 per cent as compared to the same month in 2020.
- Expenditure on essential items rose 5.3 per cent while on non-essentials, it dropped 22.1 per cent.
- Retail chains are trying to adjust to the new landscape by investing in e-commerce platforms and adopting localised retail models.
UK consumers cut back heavily on spending during February while being forced to spend most part of the month in coronavirus lockdown. The latest Barclaycard consumer spending survey revealed that consumers’ expenditure reduced by 13.8 per cent in February 2021 as compared to February 2020. A similar trend was seen during the previous month when the spending fell by 16.3 per cent compared to January 2020 as lockdown was in full swing.
Retail chains like Marks & Spencer Group plc (LON: MKS) and JD Sports Fashion plc (LON: JD.) are taking proactive steps to prosper through the continuing restrictions.
Consumers were spending on essential items which rose by 5.3 per cent for the month. But spending on non-essentials plummeted 22.1 per cent as many high-street retailers were still closed. The survey was conducted on more than 2,000 people between February 10 and 22.
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At the same time, another Barclaycard survey result showed that the overall consumers’ confidence in the economy rose to 28 per cent, up by 4 percentage points in February. It was the highest monthly rise since pandemic hit last year. The British economy is expected to grow strongly once the restrictions are completely lifted by June end.
Also Read: British consumer spending plummeted 2.3% in December: Barclaycard survey
Retail chains adapting
The non-essential shops will be reopening from 12 April at the earliest, which has put the retail sector under unprecedented pressure. Firstly, trying to adjust to the new landscape, retailers have invested in their e-commerce platform throughout the last year. They are embracing technology to gain competitive edge and let their consumers gain a smooth and quick experience. For instance, Hotel Chocolat created 200 jobs last year by strengthening its e-commerce platform which in turn rapidly accelerated its digital sales.
Also Read: Budget 2021: How Can the Contactless Limit Increase Help the Retail Sector?
Secondly, store locations as well as supply chains are shifting to become more localised as a result of the pandemic. Retailers in the categories of home improvement, sports, and entertainment are looking to move to close by suppliers. These localised supply chains will lower the carbon footprints, apart from bringing in other benefits.
Similarly, a localised retail model has gained popularity with local high streets performing better than those in the big cities. So, retailers are trying to grow their community footprint. For instance, John Lewis recently extended its click and collect partnership with Co-op, expanding its footprint to 900 locations in the UK.
M&S expands online presence
Turbocharging its online presence, Marks & Spencer Group Plc (LON: MKS), the British food and clothing retailer, expanded its web presence to over 100 markets by launching 46 new websites. In its recent financial results, the company had reported a 75 per cent rise in its global e-commerce sales, reflecting the shift in consumer spending pattern.
The company stock (LON: MKS) was trading at GBX 149.50 points on 9 March at 8.53 am, up by 0.3 per cent from the previous day’s close. It had a a market capitalisation of £2.92 billion and a dividend yield of 0.074 per cent.
JD Sports prospering
JD Sports Fashion plc (LON: JD.) had said in its latest trading update that it was confident of garnering a PBT (profit before tax) worth at least £400 million for the full year to 31 January 2021. With consumers readily switching between physical and digital platforms, the company’s like-for-like businesses were already over 5 per cent ahead for the 22 weeks ending 2 January 2021 against the same period a year ago.
The company was also planning to open a distribution warehouse in the European Union to lower costs. The company stock (LON: JD.) was trading at GBX 807.2 points on 9 March at 8.31 am, up by 1.15 per cent from the previous day’s close.
