Amidst the enthusiasm that has emerged from the run-up to Christmas, during which we have been treated to a flurry of uplifting and nostalgic creative works relayed on our TV screens, the reality on the high street paints a far more unsettling picture for retailers. As had been anticipated by financial experts in the preceding months, consumers’ confidence has indeed been hampered, owing much to Britain’s tumultuous path towards exiting the European Union, which has understandably left many people feeling reluctant to splash out on gifts.
The figures generated from Boomerang’s research in November substantiate these concerns, revealing that consumer spending has plummeted to a 4 month low. Given that the festive is earmarked as a make of break moment for retailers, as it often accounts for such a significant proportion of sales, these figures would have dealt them a chastening blow in their bid to withstand the obstacles of economic and political adversity. With one eye to future, forecasted changes to international trade and UK demographics will undoubtably provide an opportunity for brands to reach out to a new type of audience; but fortune is likely only to favour those prepared to adopt and devise new means of engagement.
Back in October, Chancellor of the Exchequer Philip Hammond spoke despondently of the “cloud of uncertainty” that surrounds the issue of Brexit. 2 months have since passed and the official figures have provided credence to his claims, with retail sales having sunk to the biggest drop recorded since the recession, which is consistent with a lack of willingness among consumers to indulge in the annual shopping frenzies continually flaunted to us. Just this week, the once formidable retailer Toys “R” conceded defeated and opted to shut down 1/3 of its UK stores in an effort to minimise loses, leaving more than 800 jobs in its wake. Steve Knights, UK Managing Director of Toys “R” Us, acknowledged that while this was a immensely difficult executive decision, it was indeed the best course of action, asserting that ‘like many UK retailers, we need to transform our business so that we have a platform that can better meet customers’ evolving needs’. Whether or not Brexit is solely responsible for this trend, the implications of extortionate costs of living in the UK are beginning take a hold. This, coupled with intensified inflation and the ever decreasing value of the pound has seemingly rendered this ‘the season to be gloomy’ for those on the high streets.
Mark Antipof, chief commercial Officer echoed these concerns when he spoke to The Independent in the aftermath of Black Friday last week, emphasising that ‘2017 has seen a reversal of fortunes – with inflation outpacing wage growth and the recent interest rate rise leaving shoppers with less money in their pockets’. Consumer spending has been long been considered a driving force for economic growth in the British economy; but with GDP growth forecast for 2018 stood at a measly 1.4%, similar issues are scheduled for the new year, in which brands and retailers alike will be faced with further adversity.
Against the backdrop of leaving the European Union and the turmoil that has since ensued, dark clouds do not cover the entirety of our economic horizon. In recent months, the generation of young Chinese millennials has emerged as a potential gold mine for UK retailers, who in contrast to the British young, are not constrained with student loans and possess an unprecedented spending power in the midst of their profilerate national prosperity. In spite of our internal upheaval, the allure of Britain remains strong and continues to occupy the minds of this second generation of Chinese travellers. “Chinese people love to travel and they are drawn to the UK by the shopping opportunities, and entertainments on offer such as music, theatre and football – especially football. Another key pull is education; there are a huge number of well-respected and renowned universities so it’s a popular place to study,” said Jie Chen, digital media and consumer specialist at Digital Retex.
In Campaign last week, it was reported that over 200 million Chinese consumers are predicted to visit the UK by 2020, which could play an important role in overturning our fortunes. Evidence of their spending potential was exemplified during Golden Week, a Chinese public holiday in October in which spending is ruthlessly encouraged, when the fall of the pound attracted young Chinese tourists to the UK en masse, where they forked out an eye catching £29m on our high streets, which illustrates the important role they could play in Britain’s post-brexit future. However, companies seeking to benefit from this will have to demonstrate their flexibility and refrain from adopting a one-size fits all approach, as something that has been successful in engaging Western consumers is unlikely to resonate in the same manner with the “young, digitalised and affluent” Chinese travellers, as Georganna Simpson rendered them.
Within China, the use of Facebook and Twitter are blocked. Instead they have developed their own state-owned online platforms, notably Sina Weibo and Yokbu which boast 10,000 users and 50,000 videos viewed respectively, which makes this young Chinese audience less accessible through some of these conventional avenues of engagement common in the West. Despite this, Western brands are encouraged by experts to further embrace digital advertising, since over 50% of internet use in China occurs through mobile technology, something that is certain to be discussed at length during the the 6th Annual CBBC China Business Conference taking place Westminster in March.
Meanwhile, the Chinese President Xi Jinping announced as recently as this week that he is committed to developing an international digital economy in a bid to attract further foreign investment, affirming that the doors “‘will only be opened wider and wider going forward”. China’s leading messenger app WeChat, has been cited as a potentially fruitful means of targeting and alluring some of its 800 million users to UK high streets. The app is just about everywhere throughout China, and permits companies from around the world and brands to transmit promotional messages and images visually to users and to communicate with them instantaneously should they have any queries.
While the focus of the UK Government and businesses will inevitably be redirected towards fostering a closer relationship with China, through which trade will thrive, the British youth have being encouraged to learn Mandarin in a bid further the potential for establishing personal relations and ultimately exploit the emerging golden stream. Mandarin in the context of business is however completely unlike speaking some of the basic teachings at school level and would necessitate a greater level of investment from our government into recruiting high-quality teachers. Furthermore, as it stands today the teaching of Mandarin is occupied exclusively by students of a high academic level, as opposed to being optional. The challenge is to embed Mandarin into the curriculum on a more general scale.