Retailers will need to brave fierce headwinds in 2017

Tracey Boles
Consumers In The Christmas Eve Retail Rush
The West End is well-placed to benefit from a weaker pound (Source: Getty)

The high street's cold snap over Christmas and the New Year is not just seasonal. Several chills running through the sector could finally be felt with their full force in 2017.

Rising inflation, falling wage growth, escalating costs and sterling's depreciation are all expected to weigh on retailers in the coming months.

If inflation takes hold, we may see a dip in consumer confidence and therefore some deferral or cancellation of purchases, particularly bigger ticket discretionary items.

Sterling's weakness will bite harder, assuming no revaluation, potentially hitting margins or volumes as prices rise. Moreover, retailers' currency hedging contracts, which have protected them from some of the post referendum fallout, will expire this year or next. Competition will intensify. Leading analysts see the relentless march of online shopping continuing this year, particularly in the non-food sector, where it is likely to squeeze footfall further.

Costs are rising. In April, the national living wage goes up as do business rates. The apprenticeship levy will come in at the same time.

There will be some winners. Shore Capital's Clive Black expects good discounters and defensive low ticket non-discretionary grocers to be “sound”. The West End with its high end shops is well-placed to benefit from retail tourism as visitors from overseas make the most of a weaker pound.

But don't be surprised if you see a flurry of retail failures. There is already some talk of 2013 when Barratts Shoes, HMV and Jessops went into administration following the financial crisis.

Read more: Here's what retailers could do to take in-store shopping to the next level

How can retailers ensure they are not among the losers? Good management is not passive and, where bosses are effective, this should feed through to performance. Clever retailers will be planning ahead, buying judiciously, managing costs and controlling cash. They will adapt to the changing nature of British shopping habits as demonstrated by last November's bumper Black Friday versus lacklustre Boxing Day footfall on the high street.

Retail top brass who fail to take clear action in the face of 2017's headwinds will be shown up as not fit for role. In what has always been a dog eat dog sector, this year is set to be about survival, for retailers and their bosses alike.

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