Hybrid approaches will dominate the retail sector during 2024, according to British financial services company Hargreaves Lansdown.
Amazon has seen some serious profit erosion in the last few years after overspending and underdelivering on the retail side, so there is a lot riding on its festive season results early in 2024.
“The early signs look promising for the king of e-commerce with a whopping 88% of consumers expected to make a purchase on the platform during the festive period,” says Susannah Streeter, Head of Money and Markets, Hargreaves Lansdown.
“But not all online retailers can boast the huge clout of Amazon and others, particularly apparel retailers are likely to continue to struggle as hybrid approaches dominate the retail sector.”
“Although online shopping is now firmly ingrained as a habit for the long-term, shoppers still clearly want the in-store experience and e-commerce retailers are likely to continue to have a tougher time, particularly as competition for shoppers’ wallets heats up amid the cost-of-living crisis.”
Streeter notes that Asos and Boohoo were the e-commerce stars of the pandemic, but they’ve been frozen out of the limelight as shoppers have pinged back into shops to try before they buy without the hassle of multiple returns.
She adds: “An agile social media presence is crucial in the hybrid retail world, a skill Primark has long recognised. Now Primark is brushing up its hybrid credentials and has joined the Click and Collect party, its resistance to online batted away, as e-commerce stays a crucial revenue stream for its rivals.”
“UK fast fashion names are also facing tough competition from Chinese firms Shein and Temu. They are aggressively expanding across the world, offering super cheap fashions which are highly tempting for cash strapped consumers.”
“These fast fashion rivals pumping ads into social media and using referral schemes to hook in shoppers are unhampered by high rents and business rates.”
“Shoppers with scruples and steady disposable incomes may be able to resist their cheap charms, but people desperate to find bargains amid cost-of-living pain are likely to be seduced.”
Shoplifting threats continue amid automation drive
UK retailers are expected to continue to limit capital expenditure with investment set to stay channelled into automation in warehouses and stores.
But this could end up exacerbating the shoplifting crisis. As consumers have been buying fewer items, thieves have been making off with more and this trend looks to continue into 2024.
The British Retail Consortium estimated the crimes would cost retailers just under £1 billion pounds in 2023, with little set to change the situation going into next year. We are likely to see more store using technological innovations to cut down on costs and stop margin erosion but this trend risks leading more shoppers into temptation, Streeter believes.
“It’s not a coincidence that the rise in shoplifting comes amid the spread of self-scan tills in stores, with fewer staff on hand to spot shoplifters,” she says.
“The proliferation of security tags on items and padlocks on in-store fridges is unlikely to be enough to deter thieves from slipping unscanned items into bags, or brazenly running out with stolen stashes.”
“As more self-scan machines are introduced, other tech is increasingly being brought in to monitor our behaviour and we are likely to see an increased use of AI for facial scanning to try and spot repeat offenders.”
Store closures set to stay headline news
As the era of cheap money has hurtled to an end, retailers relying on this are likely to face a precarious 2024, if they need to roll over loans.
Many stores in town and city centres could be faced with a triple whammy of the cost-of-living crisis, hybrid working limiting footfall and higher borrowing costs.
Streeter comments: “It’s not a surprise that there are predictions of another wave of shop closures across the UK.”
“The Local Data Company, which crunches the numbers on retail outlets, is forecasting that there will be between 8,000 and 15,000 fewer stores by the start of 2025. Clamour for local authorities and national governments to launch incentivisation strategies for regeneration are set to continue.”
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