How the UK retail sector is sailing into a perfect storm

The retail sector is struggling. Bellwether Next is due to return to recession-stricken times with its first fall in profits since the crisis and John Lewis, long held up as a bastion of the industry, is cutting jobs and its famous staff bonus in order to safeguard its future. Meanwhile, a slew of smaller high street rivals, including Jones Bootmaker, Jaeger and Blue Inc, are shutting shops and being put up for sale as their owners look to secure a means of survival.

When people do spend their money on retail purchases, increasingly they are shopping online with “clicks” rather than in bricks and mortar shops.

Smartphones and social media feed a demand for instant gratification that has played into the hands of youth-focused online retailers like Asos, Missguided and Boohoo.Com PLC (LON:BOO), which are stealing sales away from their traditional rivals.

Their stellar growth is now heaping pressure on traditional retailers to capture this part of the market.

While store sales are stagnating, online sales grew by 15pc last year. They now account for around 18pc of total sales compared to just 2.8pc 10 years ago. As a result, the retail sector is facing a dilemma between investing in expensive logistics in order to compete against their online rivals and investing in revamping their expensive store estate to lure in shoppers at a time of dwindling high street footfall.

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