Retail Outlook 2020: Thriving in a changing retail & consumer landscape

What retail might look like in 2020, what this means for retail and consumer brands and how to succeed in this changing environment

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Winning the battle for share of wallet

Last year was another tough year in the retail sector, but not unexpected. This year may be just as challenging but, as ever, there are opportunities in the sector for those retailers and consumer brands that get it right in the year ahead. However, once more, the route to growth looks like it will be taking from competitors.

This year, while economic growth remains subdued and the risk of continued volatility remains, we expect the outlook to improve across the year and consumers are more confident than they have been for five years. However, though the consumer may start to be less cautious, we believe they will be more considered in their purchasing and retailers need to give them a reason to spend.  Retailers will also need to work harder to understand who their customers are, what and how they want to buy.

For strategies on how to succeed in this competitive environment, as well as our predictions for the retail sector more broadly this year, download our Retail Outlook 2020.

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Opportunities for retail and consumer brands in 2020 despite a flat market

2019 might not have been as bad as many predicted.

We saw positives, such as record Black Friday sales and improving consumer sentiment, but this was balanced against record net store closures, high profile administrations and flat Christmas trading at best.

This year, the economic outlook for the UK is uncertain given Brexit, with most economists forecasting little or no growth.

When consumer spending is tight, retailers need to give consumers a reason to spend with them, by offering better value (not just lowest price), offering something new (or different) and greater accessibility (via better curation of ranges, customer communication or credit options). To differentiate themselves in a tough, flat market, retailers need to concentrate on some very specific elements.

We saw those retailers that invested in their propositions succeed over the Golden Quarter last year. And we expect this to be the case in 2020.

Improvement in consumer sentiment but a change in spending priorities

Against many economic forecasts, consumers across the UK are showing a significant improvement on sentiment, predicting that they will be financially better off in the next 12 months.

With this improvement in sentiment comes a change in spending priorities. Grocery will remain the top spending priority for most, but many of us expect to economise by reducing waste or shopping around. Meanwhile, other categories where we’ve been cutting back over the last few years are growing in importance. And we’re seeing the start of a shift towards sustainability and ethical consumerism. Brands need to think about how they are communicating what they are doing in this area and embrace emerging trends in innovation.

The traits of the “cautious” consumer seen in 2019 - such as spending carefully, avoiding frivolous purchases and putting off less urgent bigger ticket investments - will not go away but can retailers appeal to the more “considered” consumer?

To achieve growth, retailers will need to invest. Given the cost of these investments, retailers need to ensure their back-of-house is in order, by eliminating “bad costs” and sweating assets harder.

“Investing in propositions isn’t cheap and will often need retailers to address some more difficult issues to access cost efficiencies, but retailers that meet these challenges have every chance of success in 2020.”

Lisa Hooker, Leader of Industry for Consumer Markets, PwC UK

Ways to win the battle for share of wallet

Embrace sustainability now to succeed in the future

Concern about climate is at an all-time high, affecting consumer behaviour. We look at this impact on consumer packaged goods (CPG) businesses and retailers and what they need to do to react to this increased demand for sustainability throughout a business.

Eliminate bad costs permanently by thinking consumer first

Cost reduction is an important part of business streamlining - especially at this time of year - and is essential for retailers to remain competitive. We look at ways that retailers and CPG businesses can make cost reduction work for them.

Optimise property portfolios to unlock finances

Changes in the commercial property landscape means there are now new opportunities to optimise the balance sheet through better property management. We look at how retailers can manage their property portfolios to their advantage

“It is more important than ever to know your customer and give them a reason to spend with you and take more share of wallet, stomach and closet! Whether that’s through newness, embracing emerging trends or providing great access. You can do this through the 5Cs: making it easier for the shopper to spend through seamless channels and convenience, curation, credit and effective communication.”

Lisa HookerLeader of Industry for Consumer Markets, PwC UK

Contact us

Lisa Hooker

Leader of Industry for Consumer Markets, PwC United Kingdom

Tel: +44 (0) 7802 882 562

Kien Tan

Director, Retail Strategy, PwC United Kingdom

Tel: +44 (0)20 721 23910

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