Green shoots in a challenging retail environment

With respect to the macroeconomic climate, when you look at data for retail, more than half of countries are seeing a slight growth, which is quite positive. For most, however, the picture is not changing very much – plus or minus 2.5% in many areas.

The UK is similar. Data from the Office of National Statistics shows the post-covid boost, after which sales have fluctuated up and down, followed by 28 months in decline. This ended in the middle of 2024, after which things have been broadly flat if slightly growing.

Breaking this down by category reveals an interesting difference, for example, between clothing and fashion, and household goods, which obviously declined massively in the post-covid world, then normalised. There followed a long period of stability and decline, and more recently we've seen green shoots of growth from both clothing and household, with food declining slightly. For clothing and household this is just one or two percentage points, so it’s not a dramatic reversal , but it’s macroeconomically better than it's been for a while.

The challenging times are far from over when you look at the various data sources. With respect to UK store closures, the picture is quite surprising. You’d expect more closures to have occurred across COVID. But actually 2024 saw the most in terms of the physical number of stores. We only have half the data for 2025, but it's looking a little better than 2024. It’s still by no means perfect, but there are signs of retail recovery. Then when you look at online, the percentage of total retail sales is pretty flat in terms of growth. There are the post-covid spikes, then a stable period, but overall it is still trending slightly up over the past 15 years.

One factor that impacts more retailers than we think are shifts within markets - businesses either losing or gaining market share. A key trend here is a growth in resale – secondhand products. Vintage retailers, for instance, are doing very well and there's a real skew towards younger people increasingly buying secondhand goods.

Rental was a bit of a fad in 2020, and then, not surprisingly, died out, because the economics are really challenging. Sending out items, getting them back, cleaning them, sending them to the next customer, then all of a sudden they are out of season. So, you've got to make so much money before that point, and it just doesn't really work.

The other area is competition between businesses. Shein and Temu are growing massively. In the UK, by 20-50% on already very big numbers. Unsurprisingly, in a world where retail is growing 1-2%, if a business is surging by 40-50%, it's taking market share from other retailers, and we see that in the industry quite heavily.

For example, ASOS’s valuation has gone from £5 billion to £320 million – and that is largely down to the likes of Shein taking customers. It will be interesting to see how this pans out because the trend of their growth was slowing. Each year has seen less growth as a percentage than the previous years. This year it’s predicted to go through the roof. The big question is whether this actually happens or if the decline continues.