KPMG/Ipsos Retail Think Tank: Increasing Prices Will Hurt the Retail Sector in 2018

According to predictions that were issued by the KPMG/Ipsos Retail Think Tank (RTT), in 2018, the retail sector will “flatline at best.’

The group made its lackluster predictions based on a combination of “continued headwinds in the form of geopolitical and macroeconomic obstacles; an increased number of regulatory compliance issues and ongoing structural change within the industry.”

However, it is consumer spending that will be the principal area of weakness for the said sector. The members of the RTT warned that disposable income would be pressed by elevated inflation and stagnant wage growth. However, real incomes are anticipated to improve in the second-half of next year. But before that occurs, the divide between non-food and food retail is anticipated to become much more pronounced, with non-food sales dented by inflated food prices.

The RTT stated: “This ‘perfect storm’ of factors may even see the industry reach a pivotal point in 2018, with increased levels of defensive consolidation and creative collaboration – as well as the inevitable fall out of casualties – the likely outcome in the ongoing fight to survive.”

The members of the think tank also said they expect to observe a close correlation between the outcome of negotiations regarding Brexit and the overall health of the industry, with a ‘soft’ Brexit resulting in narrow growth, and a ‘hard’ Brexit possibly seeing the market contract.

The chief executive of e-commerce consultancy Practicology, Martin Newman, stated: “Continued uncertainty around Brexit and its implications is undoubtedly affecting consumer confidence, which is clearly on the wane.”