Tuesday, 27 September 2011

Consumer Spendthrifts

About a week ago I suggested that I thought the Eurozone would eventually act decisively to dampen fears of a total Euro meltdown. Despite a turbulent week I still feel this is the case although I am being accused of being overly optimistic in what are undoubtedly very tough economic times. So I thought I'd address an area I am less optimistic about, that of consumer spending, or lack of, and the struggle ahead for retailers.

Many retailers have been struggling for sometime with some notable names completely absent from the high street. Consumers are being far more frugal and the austerity measures to keep the national debts in check are likely to mean it will be an even slower recovery for many retailers. Many towns and cities across the UK have many vacant units
In their centres and I expect this to continue to worsen in the short term. The demise
Of the high street may also be part of a longer term trend towards online shopping meaning retailers will need to change there business models to survive.

The most resilient section of the consumer spenders has been tourists from overseas. A weak pound has helped attract record tourist numbers although this only applies to certain locations, most notably London. It will also be sensitive to exchange rate fluctuations.

From an investor perspective I would focus on retailers offering essential items, such as the more aggressive supermarket chains, rather than what might be considered less essential retailers such as high street fashion. I'd particularly be wary of those who haven't got a strong web presence.