Positive sentiment returns to retail sector

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Surveys from PricewaterhouseCooper and the ERSI/KCB Ireland last month showed that retailers and consumers are feeling more positive

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12 October 2009 | 0

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A poll carried out by PricewaterhouseCoopers representing the views of Ireland’s key retailers revealed that positive sentiment has returned to the retail market. Over 57% of retailers polled rate their outlook for the sector as either neutral or positive, according to the findings released last month.

Furthermore, 54% of respondents said they are planning store expansions in the year ahead and 15% are seeking merger/acquisition opportunities.

Despite the survey’s positive note overall, retailers still believe there is a long way to go before the sector can recover, with 86% saying the cost of doing business in Ireland remains too high, and with consumer sentiment still very low.
In addition to tackling cost, other initiatives being undertaken this year by retailers polled include realigning product ranges (77%) and planning promotional/price-cutting campaigns (62%).

PwC commented that many key decisions for retail businesses this year, such as on product ranges and promotional activities, will be “based on poor quality information.” It said while accessing finance and upward-only rent reviews continue to present a problem, retailers can tackle many of the broader challenges head-on, once armed with the right information.

Speaking at PwC’s Retail Executive Retreat, Jean Delaney, PwC retail and consumer practice, stated: “A better understanding of what the customer wants and is prepared to pay for, is now a necessity. Retailers have traditionally focused on what’s selling rather than the gap between their current offering and what a potential customer might have purchased. The ability to respond to this gap is now critical.”

Consumers more confident

The latest findings from the ERSI show that positivity is also returning to consumers in Ireland. While in August it reported that the consumer sentiment index had weakened marginally to 48.7, it said the index of current economic conditions rose to 78.6, which reflected “consumer’s becoming more positive about the current buying climate.”

In September, the overall KBC Ireland/ESRI Consumer Sentiment Index improved to 49.6, which represents a vast improvement since the all time low of 39.6 reached in July 2008.

Commenting on the results David Duffy of ESRI said: “The results show a moderate improvement in consumer sentiment, driven by consumer expectations. The forward-looking sub-index rose to 34.4 in September, from 28.6 in August.

“Although consumers were more optimistic about the outlook for the economy and the labour market in September, nearly seven out of 10 remain concerned about how their household finances have developed over the past 12 months.

“The index of current economic conditions fell to 72.3 in September from 78.6 in August. As well as worries about the trend in their personal finances this also reflects a change in consumer’s perceptions of the current buying climate, possibly, in part, due to the ending of the summer sales.”

Austin Hughes from KCB Ireland also commented on the findings of last month’s survey. He said the results were “encouraging” and “slightly surprising” as “the combination of layoff announcements, controversy about NAMA and the Commission on Taxation Report might have been expected to weigh on confidence.”

He added that Irish consumer sentiment was probably boosted by further signs of an improvement in the global economy and, perhaps, the slowdown in the rate of job losses in Ireland. Hughes also suggested “it might be argued that consumers are glad to see policy action, even if this action is less than perfect.”

 

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