From finnCap's 28 page report on the state of the UK retail sector
City stockbroker finnCap published a bumper 28-page report on the state of the UK retail sector, discussing how consumer behaviour is changing, why mobile internet is transforming shopping behaviour, and explaining why retailers who fail to adapt will fall by the wayside.
"Consumers are breaking the mould, mobile Internet is transforming shopping behaviour globally, everyone is aspiring to create the principal relationship with the consumer and there will be more retail casualties on the horizon."
finnCap: Shopping Trolley: Consumer Quarterly Sector Note
According to finnCap retail consumers are increasingly "breaking the mould", morphing from passive buyers of goods and infrastructure into well connected, highly informed, active seekers of services and experiences.
"Consumers are no longer content as passive participants in the buying cycle, preferring to engage with the products they choose and learn about their origin and history. ‘Products with a story’ are increasingly popular (see craft beer and spirit producers for details) and consumers have an increasing propensity to identify with brands and their stories."
Millenial consumers are becoming "experience buyers" and moving away from "consumption buying", and finnCap say this means we are approaching the end of the mass consumption era. This is shown in UK consumer spending habits at the end of 2015, which showed spend on Groceries down -1% YoY compared with spend on Travel and recreation increasing 8% YoY.
Mobile shopping is booming
2015 saw mobile sales overtake desktop sales for the first time, and while online sales were only 13.5% of retail sales last year, finnCap say this underestimates the influence of online shopping:
"...this still underestimates the importance of online in terms of product search, price comparison and online reviews."
finnCap also highlight that retailers no longer require a physical presence, very few product categories cannot migrate online, and that shopping is now a 24/7 activity.
There will be casualties
In this changing climate, retailers need to adapt or die. finnCap give the BHS collapse as a good example of the possible outcome for those who "under-invest, have a poor digital proposition and lack relevance in their product offering."
According to the report, retailers that stand the best chance of survival will be those able to:
1) Accept the certainty of uncertainty
2) be prepared to widen the risk envelope
3) be constantly vigilant to new entrants
4) champion innovation
5) prioritise effectively
Stocks covered
The report focuses on several retail sectors and dozens of UK listed companies, including:
- 7Digital Group PLC
- AA PLC
- ASOS PLC
- B&M European Value Retail SA.
- Bonmarche Holdings PLC
- boohoo.com PLC
- Caffyns PLC
- Cambria Automobiles PLC
- Card Factory PLC
- Carpetright PLC
- CVS Group PLC
- Darty PLC
- Debenhams PLC
- DFS Furniture PLC
- Dignity PLC
- Dixons Carphone PLC
- Dunelm Group PLC
- entu (UK) PLC
- Findel PLC
- French Connection Group PLC
- GAME Digital PLC
- Halfords Group PLC
- Home Retail Group PLC
- Inchcape PLC
- JD Sports Fashion PLC
- JQW PLC
- JUST EAT PLC
- Kingfisher PLC
- Koovs PLC
- Laura Ashley Holdings PLC
- Lookers PLC
- Marks and Spencer Group PLC
- Moss Bros Group PLC
- Mothercare PLC
- MySale Group PLC
- Next PLC Pendragon PLC
- Pets At Home Group PLC
- Poundland Group PLC
- Safestyle UK PLC
- Saga PLC
- ScS Group PLC
- Shoe Zone PLC
- Sports Direct International PLC
- Stanley Gibbons Group PLC
- Topps Tiles PLC
- Vertu Motors PLC
- WH Smith PLC
- Gear4music (Holdings) PLC
