Commentary: Retailers will need to work a lot harder to generate growth in 2020

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Commentary: Retailers will need to work a lot harder to generate growth in 2020

By Neil Saunders, managing director of GlobalData Retail - 02/14/2020
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The year 2020 has started with modest growth in pure retail, where sales rose by 2.7%. However, this slower growth is not caused by economic difficulties as the consumer was still out spending on autos and foodservice and was willing to fork out more money on gasoline. Confidence and spending power are there, however, retailers need to work much harder if they want to tap into them.
 
Consumer spending was robust in January with total retail sales up by a solid 4.6% – an uplift comfortably above the long-term average monthly growth rate. However, much of this was down to increased spending on autos, foodservice and gas, the latter up sharply thanks to higher prices at the pump. Nevertheless, these trends show that the American consumer is still reasonably confident and therefore willing and able to spend.
 
When it comes to pure retail – which excludes gas, autos and foodservice – spend increased by a respectable, but modest 2.7%. This is below the long-term average monthly growth rate and significantly below December’s uplift of 5.7%. The consumer is clearly not prioritizing buying products, but a lot of this is down to unfavorable ranges, boredom with buying and some unfavorable weather. It is not the result of economic malaise or a lack of spending power.
 
At a sector level, apparel had a bad month with sales at clothing stores down by 0.7% over last year. Heavy discounting, unfavorable weather across some parts of the country, and a lack of compelling ranges at key players all contributed to the dip. 

Electronics stores also performed badly, with sales down by 2.9%. A lack of new innovative products contributed to waning consumer interest, especially after the December buying spree. 

On the flip slide, home furnishings sales held up with revenue at specialist stores up by 2%. Grocery stores and supermarkets also put in a good performance with sales up by 2.9%.
 
Overall, this is a reasonable start to the year. But retailers will need to work a lot harder to generate growth and persuade consumers to buy across 2020 than they did in 2019.

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