David Prosser: Damned if they do, and damned if they don't
Friday 12 November 2010
Outlook Who would be a clothing retailer just now? Bad enough that the high street is right in the eye of the coming storm of the squeeze on consumer incomes, but retailers are also having to cope with surging input prices.
New Look said yesterday that it expected to have to raise its prices by 8 per cent next year because of those higher costs – chiefly a sharp increase in the cost of cotton. It was exactly the same figure as Next used in its most recent update. On top of these numbers, you have to add in the extra 2.5 percentage points of VAT customers will be paying from January onwards.
The worry for New Look and the rest is not that customers won't be willing to pay up, but that they won't be able to. As the effects of the Government's austerity package begin to be felt – caps on public sector pay, higher taxes, rising joblessness – the number of shoppers able to pay retailers' higher prices is bound to fall.
The last six months has been something of a phoney war, with plenty of talk about austerity, but not so much action. Retail spending has thus been resilient. But people know what lies ahead: the Nationwide Consumer Confidence Index has fallen in five of the last six months: the latest data, published today, puts the yardstick at its most downbeat for two years.
The inevitable consequence is an erosion in retailers' margins. Indeed, Primark has begun seeking to make a virtue out of necessity, promising to take higher costs on the chin to remain a market leader on price.
Judging from the comments of New Look, Next and others, many retailers do not feel so comfortable with swallowing the pain
- 2 Kim Kardashian on Bruce Jenner's 'story': 'We support him no matter what, and I think when the time is right, he'll talk'
- 3 Russian girl takes her own life after parents find pornography on her computer
- 4 Ball pool for adults opens in London
- 5 Amal Clooney gives excellent response to fashion question at European Court of Human Rights
9 reasons Greece's experiment with the radical left is doomed to failure
'We would evict Queen from Buckingham Palace and allocate her council house,' say Greens
Have we reached 'peak food'? Shortages loom as global production rates slow
Greece elections: Syriza and EU on collision course after election win for left-wing party
British grandmother Lindsay Sandiford faces execution by firing squad in Indonesia
Liberal Democrat minister defends comments suggesting immigration causes pub closures
iJobs Money & Business
£13000 per annum: Recruitment Genius: This Pension Specialist was established ...
£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...
£25000 - £35000 per annum: Recruitment Genius: A Technical Report Writer is re...
Competitive salary & benefits!: MBDA UK Ltd: MBDA UK LTD Indirect Procurement...