Retailers warned 2002 will be challenging but not recessionary

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The Independent Online

Christmas retail sales will be lower this year than last and 2002 will be the most challenging year retailers have ever experienced, states a new study published today.

Christmas retail sales will be lower this year than last and 2002 will be the most challenging year retailers have ever experienced, states a new study published today.

The stark warning comes in a new five-year forecast of retail trends produced by Verdict, the retail analysts. It said the retail slowdown is already underway and that November will be "particularly difficult".

Weak demand in the run-up to Christmas will push shopkeepers to cut prices before 25 December as consumers leave their shopping to the last minute, the report said.

However, the study said there will be no retail recession with the weaker-than-expected 2.3 per cent growth in retail sales in 2002 being followed by a recovery in 2003.

Verdict predicts a slowdown to 3.4 per cent of sales growth in 2001-2006, compared to the average of 4.5 per cent between 1991-95. Margins will be lower and the need for economies of scale will become greater, increasing the case for consolidation.

Consumer spending patterns will change over the next five years and the amount Britons spend on the high street will continue to decline. Expenditure in 2006 will account for 28 per cent of the total consumer spending compared to 47 per cent in 1980.

Instead, an increasing proportion of incomes will be spent on private education, healthcare (including gym memberships), restaurants and holidays, Verdict analysts said.

The best performing sectors will be DIY and soft furnishings. Consumer electronics retailers should benefit if CD and DVD sales rise. Britons will spend less on clothing and footwear, forcing mid-market specialist stores out of business,Verdict said.

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