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BDO LLP | RETAIL FORECASTS REPORT 2021
RETAIL CATEGORY GROWTH FORECASTS CONTINUED
FOOD & GROCERY
ELECTRICALS
The impact of COVID-19 on electricals has been mixed. Food stockpiling and the increase in working from home has boosted sales of certain categories including fridge freezers and home/ home office technology. Electricals also benefited from an increase in spending on video games, as consumers looked to entertain themselves during time spent at home. However, this has come at the expense of items such as mobile phones, which has suffered from postponed launches, supply problems and general lack of demand, while economic uncertainty has bitten into spend on gadgets and other discretionary items, with this type of spend likely to weaken yet further as unemployment starts to rise. Sales through stores have been particularly anaemic, as spend has shifted even more decisively to the online channel. Dixons reported online sales were up 114% year-on-year In April, while pureplay AO World reported double digit growth in product sales for its financial year and is now looking to recruit 650 new employees across the business, from tech and social media experts to gas engineers, as it targets ambitious growth. Categories dominated by online retailers, and particularly Amazon, such as home audio equipment (set for growth of 7.1% in 2021) and smart home products, will see the fastest recovery as demand for these new technologies returns. The launch of new X-Box and PlayStation Consoles will drive significant growth of these products in 2021, as well as encouraging sales of games software.
As a direct result of COVID-19 the UK food and grocery market is forecast to grow 10.1% in 2020, the highest annual growth in more than 40 years. The market saw an initial period of explosive growth in March and April, as shoppers began stockpiling non-perishable goods, followed by significant gains as shoppers turned to retailers in the absence of hospitality and foodservice locations. Alcoholic drinks saw particularly significant volume growth (with pubs and bars either closed or restricted for much of the year), as did household products, as shoppers rushed to buy cleaning and sanitisation products. The channel shift to online has been dramatic, with penetration set to jump from 7.4% to 12.5% in 2020 - transference of £9.7bn. The surge in demand for home delivery options in March and April was high enough to cause website crashes, but supermarkets have been quick to swell capacity, epitomised by Tesco doubling its online fulfilment capacity in a space of six weeks. The dynamics of the food and grocery market in 2021 will rely heavily on the progression of the pandemic, both in the UK and abroad. Based on the outlook at the time of writing, we expect that increased food and drink spend at retail locations will continue in H1, before gradually reducing from July 2021 onwards. However, potential upwards pressure on supply costs - especially stemming from the risk of COVID-19-stricken South American countries being unable to export goods such as fruits and vegetables at the same price - means that inflationary estimates remain volatile, with Brexit related delays and upwards pressure on prices also a substantial risk.
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