Europe Retail Sales - Eastern European retailers enjoy a killer Q1, Brexit hits the Nordics

BUSINESS INTELLIGENCE Retailers in Eastern Europe – particularly Romania and Bulgaria – have enjoyed significant growth in the first three months of the year, while more mature markets such as the UK or the Nordic countries have seen their apparel retail sales stall.

FashionUnited Business Intelligence has looked into the year-on-year evolution of sales of textiles, clothing, footwear, and leather goods in specialised stores over the first quarter of the year, identifying some of the reasons for this shift: the shadow of Brexit, a global economic slowdown and a shift in consumers’ behaviours are the main drivers.

What happened in Q1 that helped European apparel sales stabilise?

To begin with, the Eurozone economy overall was – and still is - growing at a moderate pace. The Eurozone economy advanced 0.5 percent on quarter in the three months to March of 2017, the same pace as in the previous period and in line with market expectations. Although at a humble speed, European markets are starting to report early signs of an economic turnaround, which translates into consumers who are more willing to spend, highlights a macro-trends expert consulted by FashionUnited. To this point, data from Trading Economics shows that over the first quarter of 2017, GDP growth picked up in Spain, Austria, Belgium and Latvia but eased in France and Lithuania.

More advantageous currency exchanges spurred by a weaker Pound, a lower Euro and a more robust online presence also drove this slow yet steady upwards trend. More affordable Sterling prices definitely helped fueling growth in demand for UK brands.

In particular, Eastern European nations like Estonia and Romania showed growth of more than 70 percent year-over-year from smartphones, according to the Online Retail Monitor- Q1 2017 report by Google and British Retail Consortium (BRC).

In the UK, for example, department stores grew a popular choice for overseas consumers on smartphone devices, increasing 50 percent in Q1 2017. "The (growth) points to the significance of retailers tailoring their online offering to suit both traditional browsing and mobile platforms in order to satisfy shoppers. Smartphone-ready sites and quick loading times are essential to holding customers' attention and converting searches into sales," said in this regard Helen Dickinson OBE, chief executive, BRC.

UK Q1FY17 driven by overseas mobile department stores sales and weak Pound

This appetite for British department stores also reached other European countries such as Estonia, which, according to the Google and BRC report, where consumers browsing the sites of Marks & Spencer, Debenhams or Selfridges on smartphone devices in the first quarter of 2017. Retailers operating in the Baltic country generally experienced a growth in apparel sales over the first quarter of the year, adding 1.90 percent on a year-on-year basis.

Despite this overseas push, British retailers struggle to cope with lower retail sales during the first three months of 2017 as shoppers were put off by rising prices. It was the biggest quarterly fall in sales since 2010, noted ‘The Guardian’. In fact, the sharp fall in retail sales in the first quarter is the clearest sign yet that a UK slowdown is underway, according to Andrew Sentance, a former member of the Bank of England’s Monetary Policy Committee who now acts as a senior economic adviser at PwC.

Sentance said in late March that “these latest retail sales figures show that the post-Brexit surge in consumer spending has come to an abrupt end,” warning about early signs of a potential recession taking root in the UK. Data analysed by FashionUnited Business Intelligence shows positive development for apparel retail sales over the period (+3.97 percent), as unemployment remained historically low and inflation was somehow controlled.

March: the month European retailers saw light at the end of the tunnel

In general, March was the strongest month of the first quarter, with retailers operating across all countries in Europe enjoying strong trade, with the exception of Belgium.

As shown by data collated by FashionUnited Business Intelligence, retail turnover was almost 4 percent up in March on a year-on-year basis. The volume of sales grew by approximately 3 percent. Shops selling shoes, leather articles and clothes recorded a higher turnover in March, partly due to the good weather, which was a clear change when compared to the same month a year earlier. It’s worth recalling that 2016 will be noted as a year which registered unseasonable weather almost through January to December.

The Netherlands, for example, enjoyed 0.4 percent gross domestic product (GDP) growth rate in the first three months of 2017, up from the same quarter a year earlier. Additionally, reveals data from the national centre for statistics (CBS in Dutch), unemployment declined, setting to 5.1 percent in April. The combination of such news spurred consumers’ shopping, sending the retail sales of apparel up.

Brexit’s ripple effect reaches the Nordics

Although the full impact of Brexit across the different European economies is still to be seen, first predictions such as those from Bertelsman Stiftung, the economy of Ireland, Benelux countries, Sweden, Germany might be affected the most.

In the case of the Nordic countries, Sweden has gone through a period of reduced consumer spending, given the greater economic uncertainty. Looking ahead, economists point out that the insecurity generated by the UK’s exit from the EU could lead to a less optimistic economic outlook for Sweden given that the UK is one of its strongest allies in terms of trade and investment. On a national level, Swede registered in February the highest inflation rate in five years (1.8 percent). Additionally, data from Euromonitor show consumer prices rose 0.7 percent over this period driven by higher prices for clothing and other basic items.

Neighbouring Norway also saw a rapid increase in prices within the housing market, what nothing but weakened further the already debilitated Norwegian economy. The country has experienced a decrease in consumers’ spending in the past two years, as prices of gas and oil fluctuated negatively.

The map shows retail sale of textiles, clothing, footwear and leather goods in specialised stores evolution over Q1FY17

Image credits: Pixabay