The next five years will be a period of healthy growth for UK retail according to new predictions from reward programme provider Webloyalty. Research commissioned by the ecommerce partner, and conducted by retail research agency Conlumino, suggests that retail spend in the UK is likely to have increased by 14.4% by 2018, with consistent growth each year.

The research delivered three potential outcomes for retail spend in 2018, one described as ‘realistic’, while the other two were labelled ‘optimistic’ and ‘pessimistic’. In 2012 the retail spend in the UK was around £311 billion. While the realistic predictions showed that this could have risen to £367 billion by 2018, the optimistic and pessimistic predictions estimated £377 billion and £356 billion respectively.

E-Retail Contributes to Growth

One of the major factors influencing UK sales over the next five years is likely to be online shopping. A separate survey of 10,000 online shoppers has predicted that, by 2018, one of every seven retail pounds will be spent online. This means that e-retail could be worth over £50 billion in five years’ time.

The survey, conducted by retail research agency Verdict, suggests that online shopping is now being perceived as almost as enjoyable as traditional shopping, with only 4% of respondents indicating that they preferred physically going to the shops to making purchases online. Online shopping is already cited as the more enjoyable option by men and by the 35-54 age group.

The fact that many consumers can now shop from their living rooms using a tablet or laptop, rather than having to sit at a desktop computer in another room, may be contributing to the enhanced perception of online shopping. Although shopping from a smartphone is taking longer to catch on, this may change with the introduction of 4G. The 4GEE Mobile Living Index, compiled to assess the impact of 4G on mobile behaviour, suggested that 71% of EE’s 4G customers are using their smartphones for online shopping.

Technology is a key driver

Continued rapid developments in technology are another factor boosting the retail industry. Mobile chip and pin devices are helping small business compete with big companies with lower costs. These are allowing more small businesses easily accept payments which they previously may not have had access to.

Food and Health Sectors Lead the Way

According to the Webloyalty research the food sector is likely to experience the highest rate of growth, with retail spend predicted to rise by 22.9% by 2018, possibly partly due to the persistently high inflation rates in this sector. Health and beauty is also expected to do well with a predicted growth of 21.1%, followed closely by clothing and footwear, with a predicted growth of 17.2%.

Only two sectors were expected to experience a decline over the next five years. Retail sales of books are predicted to decline by 6.2%, presumably due to the continuing emergence of e-books. The biggest decline is expected in the home entertainment sector, which has already been struggling over the past few years, with sales forecast to reduce by a further 25.9% by 2018.

Consumer Confidence the Real Driver

The real key to the expected surge in retail sales is an increase in consumer sentiment or confidence. The net confidence score is calculated by taking the percentage of people who believe the economy will improve over the next six months, and subtracting the percentage of people who believe the economy will get worse in the next six months. Webloyalty’s predictions show that net confidence is likely to increase from the current figure of -29.3 to a far more positive 7.9 over the next five years.

Consumer confidence is likely to drive retail growth forward despite the fact that the economic situation looks to remain fairly stable. Today’s unemployment figure of 7.9% may drop slightly to 6.3% but is unlikely to drop further. Disposable income is set to rise by around 2.2%, but the rate of inflation will be higher at 2.8%.

Guy Chiswick, Managing Director of Webloyalty UK, suggests that although the predictions will be welcome news for retailers, slow economic recovery means that they will still have to work harder to attract and convert customers than they have done in previous times of economic boom.

He says “Knowing that the UK economy will continue down the road to recovery will reassure retailers. However, our research shows the real boom times will not be back anytime soon. The frivolous, carefree consumerism of the past is gone and retailers need to do more to really inspire customers and actively sell to them.”

Lea Pachta

Lea Pachta