‘Tough times push retailers to innovate and find new sources of growth’

At the end of last year I wrote about the impact of the strikes by Royal Mail workers. It was a difficult time for retailers, particularly those that derive a majority or all of their sales from online.

Many will be relieved to hear that another postal strike planned for mid-February has been cancelled, although there still appears to be much to trouble retailers. But my glass-half-full approach forces me to look at the positives. Despite the challenges, as we look ahead, I find myself in an upbeat mood. 

Allow me to explain.

Take the macro environment first. Inflation continues to eat into retailers’ margins and consumers’ disposable income, running at 9.2% in December, according to the Office for National Statistics, but it will drop this year as some major contributory factors ease. 

Among them are energy prices, a major headwind for consumers and businesses last year. Wholesale prices are now falling, leading Cornwall Insight, the consultancy, to predict that average annual bills will be about £3,200 from April. Expensive, for sure, but far lower than the £3,921 it forecast last November. 

This more benign outlook on the cost of living and doing business is prompting rosier assessments for the UK economy. According to John Stepek, a commentator at Bloomberg UK, it points to “at worst a mild recession, and at best a ‘soft landing’ with no recession at all”.

Consumers, in other words, should be better off – or at least less worse off – than they would have expected to be only a few months ago.

Consumers continue to evolve

Admittedly, a key factor in my upbeat mood at the beginning of 2023 was specific to eBay. We are again partnering with ITV’s Love Island, providing preloved clothes to Islanders.

This is the second time we have supported the series, following last summer’s season, and the evidence is that the partnership is having real impact.

A survey conducted for us in December by Opinium showed that half of Britons plan to buy pre-owned items this year. I believe that Love Island’s decision to have contestants dressed in pre-loved fashion has had a big role in this.

Why does this matter? For me, this trend shows two things. The first is that shoppers in the UK continue to display the behaviour of the most sophisticated consumers in the world. Only a few years ago there was stigma attached to buying preloved, particularly in categories like fashion and furniture, that held the trend back. 

“Consumers are both responding to sustainable developments and creating new markets for retailers to move into”

Now the evidence is that consumers are both responding to sustainable developments, like Love Islanders wearing pre-owned items, and creating new markets for retailers to move into. 

To underline that point, our data shows a 1,600% increase in searches for pre-loved clothing last year vs 2021 and a 24% jump last year in the number of businesses selling pre-loved items on our platform.

It’s not just fashion either. We’re increasingly seeing demand for other pre-loved items, such as furniture and tech like smartphones and laptops.

Pre-loved, of course, is just the tip of the iceberg, but it demonstrates a point, namely that retailers can help to create demand in new areas, even against a tough economic backdrop, and respond quickly to resulting changes in tastes.

UK still a trailblazing market

One of the benefits of heading the UK business of a company that trades across the world is the global lens it allows you to peer through.

As I’ve said, UK consumers are among the most thoughtful and forward-thinking anywhere. This keeps us retailers on our toes, but creates huge opportunities.

That’s why global businesses continue to want a slice of the UK market. This was laid bare in the latest iteration of PwC’s closely watched CEO Survey, released last month, which showed that business leaders rank Britain as the third most important country to invest in.

There is a long history of tough times pushing retailers to innovate to find new sources of growth. This period is no different. As the macro environment begins to improve, the sector will be in a stronger position to prosper in the months ahead.