J A N U A R Y Retail Trends 2018

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1 J A N U A R Y Retail Trends 2018 Ian Geddes

2 Important notice The document is proprietary to Deloitte LLP and should not be discussed, presented, copied, reproduced or circulated without the express written authority of Deloitte LLP. Where Deloitte is accredited as the author/source, such authority will not be unreasonably withheld. Any requests should be forwarded (via ) to: 2 Copyright 2018 Deloitte LLP. All rights reserved.

4 A L O O K B A C K A T As predicted perfect storm hits retail in 2017 Pressure mounts on retailers Consumers under pressure The continued growth of online Discounters gaining share Cost pressures rising Weaker pound Pureplays scale Not just Aldi & Lidl Staff costs Inflation up Growth of omnichannel Growing share Business rates Wage growth slowed Amazon aggressive expansion Physical expansion Rising cost of imports 4 Copyright 2018 Deloitte LLP. All rights reserved.

5 A L O O K B A C K A T As predicted perfect storm hits retail in 2017 The industry responds Cost reduction Consolidation at large space retailers Landlords mega deals Increase in administration Structural cost reduction: Stores People Investing in: Automation Tesco and Booker merge Nisa members vote for Coop takeover Space within space Unibail buys Westfield for $25bn Hammerson acquires Intu for 3.4bn 28% rise in administrations in % increase in number of large retailers Core systems 5 Copyright 2018 Deloitte LLP. All rights reserved.

7 C H R I S T M A S U P D A T E Christmas update The numbers are in -5.5% In-store footfall year-on-year for the 5 weeks to 30 December was down by - 5.5%. (Springboard/BRC) In store 35.2bn +3.4% Online 8.2bn +9.4% 2/3 2 out of every 3 spent on Christmas day was on mobile. On Black Friday, there was a record 1.4bn spent, which was up by 11.7% bn UK consumers spent 1bn on food this Christmas, where the 22 December was the biggest grocery shopping day ever. (Kantar) C H R I S T M A S S A L E S B N % +6.4% Data shows that general merchandise sales were up 6.4% online but down 4.4.% in-store. (BRC) 7 Copyright 2018 Deloitte LLP. All rights reserved.

8 C H R I S T M A S U P D A T E Christmas update Who were the winners & losers C L O T H I N G & F O O T W E A R E L E C T R I C A L S H O ME E & DI IY Y DE EP P A RT T ME E NT T SST T O RE ES S F O O D & G R O C E R Y Christmas period like-for-like 2017 v Boohoo.com Mountain Warehouse Joules Superdry Ted Baker +100%** +38% +19.2%* +12.6%* +9.0%* AO.com +11.4%** Amazon +???? Selfridges +10% Lidl Aldi Fortnum & Mason +16.0%* +15.0% +13.0% Fat Face +8.0%* Matalan +7.3%* 0% -2.8% Primark Burberry +7.0%* +3.0% N Brown +2.7%* Next +1.5%* Moss Bros -1.1% M&S Boux Ave Dixons Carphone +6.0% Topps Tiles Halfords Carpetright Dunelm +2.9% -3.6% +3.4% Poundland John Lewis Debenhams House of Fraser +5.6% +3.1% +-2.6% -2.9% Coop B&M Morrisons Tesco Majestic Wine Sainsburys M&S +6.2% +3.9% +2.8% +2.0% +1.3% +1.1% -0.4% Greggs +3.7% NISA +1.7% Waitrose +1.5% Bonmarche Mothercare -6.7% -7.2% 8 Copyright 2018 Deloitte LLP. All rights reserved. Please note these numbers are not audited, not reported for the same periods and therefore have to be treated with caution *Total sales ** Online sales

10 01/01/ /06/ /11/ /04/ /09/ /02/ /07/ /12/ /05/ /10/ /03/ /08/ /01/ /06/ /11/ /04/ /09/ /02/ /07/ /12/ /05/ /10/ /03/ /08/2017 C H R I S T M A S U P D A T E Looking ahead to 2018 A better year for the UK consumer? % Growth in Average Wages vs. CPI Inflation The rate of inflation is forecast to reduce during 2018 And wage growth is expected to rise We expect to see some easing of pressure on consumers disposable incomes. Earnings - Average weekly earnings % change TOTAL Total inflation 10 Copyright 2018 Deloitte LLP. All rights reserved.

11 Net Openings and Closures Structural change Retailers cast a critical eye on store portfolios Recent trend in store closures across all sectors Demand from Leisure and Services is drying up Administrations will release even more space on to the market Therefore the rate of closures is set to increase Net openings and closures by category across UK, Non-food retail Food & convenience Leisure Service 11 Copyright 2018 Deloitte LLP. All rights reserved. Source: Deloitte/LDC Net 5,500 store closures in 2017 up from 300 in 2015

13 R E T A I L T R E N D S Retail trends for 2018 What s next for retail? Experiment with experience Shop in magical reality Get personal with AI Design for the eye Reimagine the store Be more than a store Put digital in your physical Sell online in-store Transform your business Try, try, try before you buy Answer the direct question Discover the value in your values 13 Copyright 2018 Deloitte LLP. All rights reserved.

R E T A I L T R E N D S Reimagine the store Be more than a store R

H O S P I T A L I T Y T H E E D I T @ R O O S E V E L T F I E L D

L D E P A R T M E N T S T O R E D E S I G N E D F O R Y O U R C O

14 R E T A I L T R E N D S Reimagine the store Be more than a store R E S T O R AT I O N H A R D W A R E B L E N D I N G H O M E W I T H H O S P I T A L I T Y T H E E D I R O O S E V E L T F I E L D S O N L I N E I N T H E M A L L YouTube N O R D S T R O M L O C A L D E P A R T M E N T S T O R E D E S I G N E D F O R Y O U R C O M M U N I T Y 14 Copyright 2018 Deloitte LLP. All rights reserved.

1 8 B L A C K F R I D AY P O P - U P B R I N G S M A R K E T P L A C E S T O

15 R E T A I L T R E N D S Reimagine the store Put digital in the physical YouTube A L I B A B A T O O P E N 3 0 H E M A S U P E R M A R K E T S I N B L A C K F R I D AY P O P - U P B R I N G S M A R K E T P L A C E S T O P H Y S I C A L L O C AT I O N S 15 Copyright 2018 Deloitte LLP. All rights reserved.

Y E E Z Y, K I T H & S U P R E M E O N L I N E E X P E R I E N C E S D E L I

16 R E T A I L T R E N D S Reimagine the store Sell online in-store P U R E P L AY S O P E N I N G S T O R E S BUT V E R Y D I F F E R E N T S T O R E S! Y E E Z Y, K I T H & S U P R E M E O N L I N E E X P E R I E N C E S D E L I V E R E D I N - S T O R E 16 Copyright 2018 Deloitte LLP. All rights reserved.

R E T A I L T R E N D S Experiment with experience Shop in magical

L E R S T O S C A L E A R 1 ) A m a z o n S u m m e r i a n 2 ) A p

17 R E T A I L T R E N D S Experiment with experience Shop in magical reality A R / V R F U T U R E O F F U R N I T U R E R E T A I L? B U R B E R R Y A D D S A R T O I T S A P P E X P E R I E N C E A M A Z O N & A P P L E P R O V I D E P L AT F O R M S F O R R E T A I L E R S T O S C A L E A R 1 ) A m a z o n S u m m e r i a n 2 ) A p p l e A R K i t 17 Copyright 2018 Deloitte LLP. All rights reserved.

18 R E T A I L T R E N D S Experiment with experience Get personal with AI S C A L I N G I N V E S T M E N T I N A I P E R S O N A L I S I N G T H E S H O P P I N G E X P E R I E N C E P E R S O N A L I S I N G T H E P R O D U C T E X P E R I E N C E 18 Copyright 2018 Deloitte LLP. All rights reserved.

R E T A I L T R E N D S Transform your business

R O B E F A C I L I T AT E S T R Y B E F O R E Y O

20 R E T A I L T R E N D S Transform your business Try, try, try before you buy K L A R N A M I C O - C R E D I T C H E C K B A S E D P AY M E N T E X P A N D S I N T H E UK A M A Z O N P R I M E W A R D R O B E F A C I L I T AT E S T R Y B E F O R E Y O U BUY 20 Copyright 2018 Deloitte LLP. All rights reserved.

L E V E R D E V E L O P I N G O N L I N E

E S S E S B L O C K C H A I N P R O V I D

21 R E T A I L T R E N D S Transform your business Answer the direct question U N I L E V E R D E V E L O P I N G O N L I N E A N D O F F L I N E R E T A I L B U S I N E S S E S B L O C K C H A I N P R O V I D E S P L AT F O R M F O R D I R E C T T O C O N S U M E R E C O S Y S T E M 21 Copyright 2018 Deloitte LLP. All rights reserved.

U Y O N E, G I V E O N E R E I S U P P O R T S

T H R O U G H V O L U N T E E R S A N D D O N

N S P A R E N C Y A N D A U T H E N I C I T Y

22 R E T A I L T R E N D S Transform your business Discover the value in your values B O M B A S B U Y O N E, G I V E O N E R E I S U P P O R T S C O N S E R V AT I O N & C O M M U N I T I E S T H R O U G H V O L U N T E E R S A N D D O N AT I O N P R O V E N A N C E C R E AT E S T R A N S P A R E N C Y A N D A U T H E N I C I T Y 22 Copyright 2018 Deloitte LLP. All rights reserved.

23 R E T A I L T R E N D S Our to do list for 2018 Reimagine the store, experiment with experience, transform your business 1) Be more than a store 2) Put digital in your physical 3) Sell online in-store 4) Shop in magical reality 5) Get personal with AI 6) Design for the eye 7) Try, try, try before you buy 8) Answer the direct question 9) Discover the value in your values Reimagine the store Experiment with experience Transform your business 23 Copyright 2018 Deloitte LLP. All rights reserved.

24 R E T A I L T R E N D S Deloitte Insight Our latest thinking for retail Global Powers of Retailing 2018 Retail 360/ Connected Stores Deloitte Consumer Review: The Brexit Consumer Retail Productivity: Shop for tomorrow s workforce TMT Predictions Copyright 2018 Deloitte LLP. All rights reserved.

25 This publication has been written in general terms and we recommend that you obtain professional advice before acting or refraining from action on any of the contents of this publication. Deloitte LLP accepts no liability for any loss occasioned to any person acting or refraining from action as a result of any material in this publication. Deloitte LLP is a limited liability partnership registered in England and Wales with registered number OC and its registered office at 2 New Street Square, London, EC4A 3BZ, United Kingdom. Deloitte LLP is the United Kingdom affiliate of Deloitte NWE LLP, a member firm of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee ( DTTL ). DTTL and each of its member firms are legally separate and independent entities. DTTL and Deloitte NWE LLP do not provide services to clients. Please see to learn more about our global network of member firms Deloitte LLP. All rights reserved.

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