The holiday season is anticipated to be a difficult time for UK fashion retailers, as two-thirds of them express concerns about their festive trading. A survey conducted by Inventory Planner, a forecasting and planning software supplier, shows that these retailers are worried about the impact of rising interest rates and inflation on their peak trading period leading up to Christmas.
Over the past two years, there have been 14 consecutive interest rate increases, with the base rate reaching 5.25%. This has led 41% of fashion retailers to plan on reducing their stock purchases for the holiday season. They believe that higher interest rates will have a negative effect on consumer spending during this time.
The survey also highlights the issue of inflation, with 59% of retailers stating that they are unwilling to pass on the full cost of rising prices to their customers. Furthermore, 61% of respondents worry about losing market share if they were to do so. This hesitation to increase prices could potentially impact their profit margins.
In addition, the survey reveals that 60% of fashion retailers are concerned about being accused of ‘greedflation’, which refers to passing on above-inflation price rises to boost their own margins. This suggests that retailers are apprehensive about the potential backlash from consumers who are already feeling the effects of inflation.
The impact of inflation on inventory management is another major concern for fashion retailers. 70% of respondents reported that inflation had significantly affected their inventory over the past year. This further adds to their worries about profitability and overall financial stability.
The economic turmoil caused by rising interest rates and inflation over the past year has left many retailers with a bleak outlook for the future. In fact, 49% of respondents admitted that their cash flow position is currently precarious, and 42% stated that they have experienced frequent cash flow issues throughout this year.
Apart from interest rates and inflation, fashion retailers are also grappling with other issues such as cash flow management and stock inventory. A third of respondents admitted to struggling with effective cash flow management, while 45% reported having written off stock in the past year. Additionally, 29% of retailers had to dispose of up to 10% of their stock due to various reasons.
As Black Friday approaches, retailers are eagerly looking to this event to boost their sales. This year, 67% of fashion retailers are planning to offer discounts on their products, hoping to attract customers amidst the current consumer downturn.
The decline in consumer spending over the last six months has resulted in excess stock for 65% of retailers, which has become a major concern for nearly half of them. Additionally, 37% of respondents confessed to having too much cash tied up in inventory, and 45% expressed difficulties in accurately forecasting demand using manual spreadsheets. These inventory management challenges indicate the need for more efficient systems and strategies to reduce costs.
On the other hand, 41% of retailers have experienced stockouts in certain product lines over the past six months, resulting in a loss in revenue for three-quarters of those affected. This highlights the importance of accurate demand forecasting and effective inventory management to meet customer demands and maximize sales.
Overall, the survey reveals the diverse challenges and concerns faced by UK fashion retailers during the upcoming festive season. These include the impact of rising interest rates and inflation, the need for efficient cash flow and stock management, and the importance of accurate demand forecasting. As retailers navigate through these difficulties, it is crucial for them to adapt their strategies and systems to ensure a successful holiday season and a prosperous future.
Useful links:
1. UK interest rate rise and its impact on businesses
2. How Black Friday can impact fashion retailers
