Retail Sector Struggled In May 2011

High street spending was down again in May 2011. Weather cannot be blamed this time so it really is simply that people are saving their money.

This is really a good thing as as for too long people have been borrowing too much. Maybe the downturn is spending is not the result of people making the conscious decision to save, maybe it is simply because the big spenders of the past simply cannot get any more credit.

The treasury reminded us yesterday that the UK is not in recession, but as far as the average household is concerned, with still high unemployment, pay freezes, high inflation and very high petrol and food prices, we may as well be.

The worse hit products have been clothes and footwear. This is generally where women spend most money so a downturn is an indication that household budgets have been squeezed.

Also larger household items are suffering, including large furniture items such as sofas and new beds. People are just making do with what they already have instead of borrowing money to buy something new.

In these days of austerity one thing is clear – most people are getting by OK and less resources are being wasted on replacing items that are not broken.

Some of the biggest losers during this downturn are Focus DIY (who we have already reported on) and Oddbins, both of which have gone into administration. Oddbins was more of a surprise as the drinks industry generally fares well in the bad times. It is likely that shoppers are buying more wine from supermarkets who often provide cheaper options.

Many UK Store Closures

In additional to Focus DIY and Oddbins many other companies have announced that they will be closing down some of their high street stores. Mothercare announced a few weeks ago their plans to close down many of the high street branches to focus on the retail park stores. Other companies closing down shops include:

  • HMV
  • JJB
  • Comet
  • Dixons

The entertainment and electrical industry seems to be really suffering. Combined with the Currys-Dixons store mergers in 2006, the problems of many Bennetts Electrical stores in the East earlier this year the number of electrical shops on the high street is the lowest it has been in decades. There are still many mobile phone shops but people are either buying fewer electrical items or using the Internet instead (on a personal note, I ordered a new DVD drive for my PC yesterday from Amazon as it was half the price of any high street store).

The only way to boost retail spending again is to increase employment and reduce tax and fuel prices. Neither appears to be happening in the near future.

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