Online shopping

MAGGIE PAGANO: The shift to online shopping is hitting city centers

That old adage, “When the going gets tough, the tough go shopping,” has never been more apt.

As the latest round of Christmas shopping updates from some of the UK’s biggest companies show, the pandemic has failed to dampen UK shoppers’ appetite for spending.

But what is starting to show in business results is that shoppers’ habits are changing as to how and where – and across what products – they allocate their income due to the impact of Covid shutdowns and restrictions.

As the latest Christmas trading updates from some of the UK’s biggest companies show, the pandemic has failed to dampen UK shoppers’ appetite for spending

Moreover, companies that are doing particularly well, such as Sainsbury’s, Dunelm or JD Sports, are those that have quickly adapted to these changes.

To be fair, it’s also lucky because they’re already in the areas where customers are channeling their spending, which is mostly on home and food.

Take Sainsbury’s. Preparations for Christmas were excellent with strong grocery sales, including bubbly champagne sales, reflecting how customers stocked up for more treats at home.

The profits for the year have been revalued accordingly. Yet at the same time, Sainsbury’s is keeping prices low, and clearly unafraid to take the fight straight to the hearts of German dissidents, Lidl and Aldi.

The grocer knows that keeping prices competitive and offering customers value for money is the best way to increase volume, and will continue to do so this year as the cost of living rises.

Dunelm is another to benefit from the change. Helped by customers upgrading their homes, the furniture group is now improving its profit forecast.

Compared to two years ago, Dunelm reports sales up 26% and forecasts £140m for the first half and a “material” increase for the full year.

Young people may not be spending as much on going out or dressing up for the holidays, but they’re still shelling out for expensive and sought-after sneakers sold by JD Sports.

The sports channel is also putting in place its profit forecast after a “robust” performance and looks set to easily beat market expectations of around £810m.

It’s not often you hear such confident sentiments from business leaders, even in normal times, if there is such a thing.

It is therefore encouraging to hear that trade is doing well so far, especially now that the UK appears to be one of the first countries in the world to emerge from the pandemic.

Still, the past two years will not be without pain for many companies. Those legacy brands in the middle with city center department stores, such as John Lewis, Frasers Group and Marks and Spencer, will be squeezed although M&S tastes are adapting quickly, opening smaller grocery stores with a small number of ranges as a complement to.

One of the longer-term shifts in spending habits and buying behavior is that some form of “working from home” is here to stay, maybe not five days a week, but definitely a couple .

This is why online shopping is expected to continue to grow and why so many retailers – M&S, Greggs and even Pret A Manger – are leaving city centers for smaller towns or retail parks to be closer to customers, many of whom will become part time. commuters.

Hargreaves Lansdown analyst Susannah Streeter warns it will be a painful transition not just for traditional brands, but also for owners of city center properties.

Converting offices into housing is expensive and councils are notoriously slow to give planning approval. Hopefully they will see the common sense and act quickly if they want the centers to survive and the fares to be paid.

It is a matter of unavoidable needs.

Transient or not

Those inflationary clouds hanging over the United States don’t seem so transitory after all. Inflation rose for the seventh straight month to a whopping 7%, its highest level in 40 years.

Rises in the prices of energy, food, housing and new cars – by a staggering third year over year – are responsible for the jump.

While the cost of energy fell in December – its first decline since April – food prices are still up 6.5%.

Economists say there are signs that prices are easing in some areas, such as commodities, as supply chains recover from bottlenecks created by the pandemic.

Federal Reserve Chief Jay Powell needs to find a better word than “transitional” and be extremely careful with the timing of interest rate hikes if he is to avoid tipping the United States into recession. .

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