UK among most challenging retail markets globally

By

Barbara Santamaria

Published
Aug 21, 2017

Retailers in the UK, US, Germany and South Korea are under the most intense pressure to transform their business model due to industry disruptors like growing online shopping spend and fierce price wars.

Trader credit insurer Euler Hermes measured the risks related to the rapid digitisation of the retail sector, and found that the retail sectors are toughest in the UK, US, Germany and South Korea, however retailers in these countries are also well prepared to deliver changes.

Risk factors include the cost of online presence, high competition and the rising share of online sales. In the UK, 81% of customers bought online in 2016; more than twice the European average, while the discounter market share is the most competitive in the world at 10%.

According to Euler Hermes, retailers in France, Japan, Italy and Spain are less prepared to embrace digitisation than their counterparts in the UK despite facing significant pressures for change from customers.

Companies in China and India are keenly aware of the benefits of digitisation, but external pressures are limited, while the retail sectors in Brazil and Russia are outdated and market players struggle with structural difficulties.

In the UK, risks related to digitisation are joined by financial challenges, with the uncertain economic outlook expected to weigh down on retail sales, according to Ludovic Subran, chief economist at Euler Hermes.

“Our forecasts expect inflation to rise by 2.5% this year and a further 2.6% in 2018 as sterling continues to depreciate, stunting real consumption growth to 1.7% in 2017 and 1.3% next year. Against the backdrop of worsening macroeconomic prospects, Euler Hermes estimates the UK retail sector faces a medium risk level for non-payment.”