Austerity fatigue, consumer behaviour and still choppy High Street waters

Tesco’s announcement of a halving of profits for the first half of the year suggests there is no clear sign that its turnaround plan is working.

It seems that any recovery in retail in general and the High Street in particular is still very uncertain.

While there is some evidence that consumers are spending a bit more, this is generally benefiting the “budget” retailers, such as Primark, Aldi and the near-ubiquitous variations on the Pound store theme, but not on larger items such as white goods or furniture.

As a small illustration of a fairly typical High Street, Ipswich has, in the last couple of months lost Gap and Next from its main shopping street, while Primark is in the process of expanding into the space left vacant. Also, with three High Street versions already on the Pound theme, a fourth has just been opened.

All this suggests that while consumers may be spending money, this may have more to do with austerity fatigue and the need for the occasional treat and there are still ongoing worries about job security, low interest rates and the economic future.

The one bright spot seems to be a growth in small niche and independent retailers who are benefitting from a shift to more frequent but lower value shopping by consumers.

The question, though, is whether such retailers can survive in the longer term, given the increasing pressure on their margins, prices and costs.

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