Retail On Its Knees As Consumer Confidence Dips

It's another very dark day for the high street. Maplin and Toys R Us are in administration after neither could find a buyer. It has been estimated that between 5,500 and 6,000 jobs are at risk across the two groups.

Regular readers will remember that I, like many other observers, suggested the first couple of months would be tough for retailers. There have been some closures of small chain stores already, and Debenhams and Mothercare have put out post-Christmas profit warnings less than two years after the familiar name of BHS disappeared from the high street. 

What's more, retailers that are hoping consumers will come to the rescue after the second payday of 2018 kicks in might well be disappointed. According to researchers at GfK, consumer confidence is at minus ten on its scale -- far worse that February last year. In fact, the only time it got even worse than this month's depressed level was in the run-up to Christmas 2017. 

Retailers have had a double or treble whammy. Confidence among consumers who haven't had meaningful pay rises in years is low and they are understandably concerned about the state of the economy as Brexit negotiations trundle along.

They have also had to deal with soaking up a rise in the cost of imported goods, due to the weak pound. These rises can't be passed on to consumers because, to the contrary, retailers are hooked on discounting to try to prod some life back into customers. When you run Black Friday offers and they are largely what you have already been offering, there are two conclusions. Black Friday 2017 was a damp squib and it underlined discounts are now expected all year long, because retailers have trained consumers that way.

Then there are the increases in business rates and, of course, the rise for the online retailer. How can these huge retail empires with real estate stretching the length and breadth of the country compete against agile online specialists such as Amazon, that run out of a warehouse?

One could usually throw in a line here about local councils pricing motorists out of local high streets with yellow lines and parking meters. However, Toys R Us is the archetypal out-of-town retailer with massive car parks tempting customers to their doors. Maplin also has many stores beyond the conventional high street. 

It would appear that nonexistent wage growth has hit spending habits and the traditional retail giants are feeling the heat. Retailers have been fighting a battle with rising costs and the requirement to permanently discount all year round for just too long. 

It is hardly surprising that a lack of consumer confidence and an inability for retailers to pass on cost increases has seen two major closures today. 

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