Director, Retail Ireland, Ibec
After a few years of major economic upheaval, retail and consumer trends have normalised over recent months.
The volatility caused by Covid-19 and then the war in Ukraine demanded major interventions by the Government to support businesses and consumers, but the trading environment has now improved.
Retail trends normalising after period of flux
We should be looking towards a period of steady growth in the retail sector, although the recent increases in interest rates and high inflation have left many consumers cautious. There are reasons to be positive, though. The wider economic fundamentals remain sound, employment figures are strong and look set to remain so, and public finances are healthy.
More importantly for the performance of retail, wage growth is beginning to rise in real terms, after accounting for inflation. This will support consumer spending as we move towards the key Christmas trading period.
Digital technology continues to dramatically
challenge existing business models.
Improvement over the last year
The positive backdrop has led consumer sentiment to steadily improve over recent months; most are confident that the worst of the inflationary spike is behind us. However, we still have some way to go to fully recover from the low of last September.
Since then, inflation has eased significantly across the economy, translating into broadly positive retail sales trends over recent months. Consumer spending should grow by about 4.2% this year, easing back slightly to around 4% next year.
Industry changes demand additional investment
Beyond the more immediate retail trends, the sector continues to be on a journey of fundamental change. While we have seen a return to more typical shopping patterns post-Covid, digital technology continues to dramatically challenge existing business models. Online sales as a proportion of overall sales continue to rise, and the speed and ease of online shopping continue to improve.
For many businesses, keeping pace is demanding major, new investments in digital channels and their in-store experience. For others, these shifts offer new ways to reach consumers that were not possible previously.
Other key aspects of retail businesses are also demanding significant additional focus and investment. The transition to a low-carbon economy will require a fundamental change to how many businesses operate, while skills shortages remain acute in many areas.
For retail businesses that have successfully navigated the volatility of recent times, the coming years will present fresh hurdles — but also opportunities. A wider economy that is performing well will support the development of the sector as consumer, employment and environmental change requires a new focus on transformational investment.