Annual report and financial statements 2008

Marketplace trends

In 2007/08, the retail market continued to grow, but at a slower rate than previous years. Increasing levels of debt and household bills have had an impact on consumer confidence, which is at its lowest point since 1993 (GfK research). The growing demand on disposable income has also seen customers prioritise essential bills at the expense of shopping and leisure activities.

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Generally, customers continue to look for more choice and convenience. As a result, the trend for shopping online has increased, partly due to greater customer confidence in payment security and delivery. Retail parks and out-of-town shopping centres have also grown in popularity, offering greater breadth of choice in products and shopping formats that fit around customers’ differing needs and busy lifestyles.

Looking specifically at the clothing market, sales have been the hardest hit by the recent decline in customer confidence – slowing through the last quarter of 2007/08 and now in decline on the year (TNS market research). In a change to last year, customers have started to spend more on individual items of clothing, investing in a few key pieces that offer versatility and can be dressed-up or down. As a result, value growth is marginally ahead of volumes. The exception to this is in womenswear where customers continued to buy ‘more for less’ driven by a desire for fast fashion and multiple looks.

Despite a slowdown in the housing market, there was generally strong growth in homeware sales as customers updated their homes, rather than move house. Specifically, electronic goods continued to sell well across the industry, as price deflation of the latest ‘must-haves’ made them more accessible to more people.

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The food market held up primarily through price inflation and customers buying more premium products. Customers have become savvy in shopping across different outlets to make the most of their food budget – carefully choosing ‘what they buy where’ from the basics, to treats.

The growing trend for fresh ingredients has continued, with customers looking for key ingredients to cook from scratch, or quality products that allow them to assemble a fresh meal. The increasing profile of food sourcing and animal welfare issues, has also encouraged them to trade-up to products that are free range and organic.

In the year ahead, the trading environment will be tough. Customers will feel ongoing pressure on their personal finances. In these challenging conditions, they are expected to turn to trusted, well-established brands that provide reassurance they are spending their money wisely.