Ian Gilmartin, head of retail and wholesale at Barclays Corporate Banking, met senior representatives from the Welsh retailing sector at Hensol Castle. Here he describes the challenges, threats and opportunities facing the sector

retain a greater proportion of profit, which is a crucial source of reinvestment for businesses. Despite calls for a review of the rates system, retailers look set to endure an increase in tax again in 2018.

The introduction of the 2020 national living wage target set by the UK Government looks set to hit the retail sector the hardest, leading to a projected 10% increase in costs for retailers. The BRC predicts as many as 900,000 jobs could be lost in the industry by 2025.

Those jobs that do remain are expected to be more productive and higher-paid. Last year saw a 7% increase in the average retail wage across Wales, outperforming the rest of the UK.

HOW DOES THE WELSH RETAIL SECTOR COMPARE TO 12 MONTHS AGO?

Aside from the news hitting the headlines about shop closures and drop in footfall, the retail sector in Wales provides something of a mixed message. Across some of the largest cities (including Cardiff, Swansea and Newport), most have seen a slight downturn in the number of retail premises occupied.

The average number of retail premises in towns and cities across the country has declined marginally from 133 in 2013 to 131 in 2017. In town centres there is a slight increase in the level of vacancy rates, with Abertillery and Rhyl having threequarters of retail premises vacant in 2017.

The importance of the retail sector is still evident, with approximately 71% of Welsh towns having threequarters of their premises occupied by retailers. Much like the rest of the UK, retailers are challenged to keep costs down across their premises and challenging business rates compound the issue.

Still, we see a strong demand for retail in Wales and it is quite clearly an important contributor to the Welsh economy in terms of jobs and output.

WHAT ARE THE TRAILBLAZING RETAILERS DOING TO SURVIVE AND THRIVE?

The most recent Christmas trading period highlighted a couple of key themes across those businesses which performed positively and those which haven’t reached expectations. Retailers who continue to invest in a coherent omni-channel presence look set to capitalise on the shift in consumer purchasing behaviours.

Footfall in Wales dropped 2.6% from November, highlighting the transformation of shopping with a surge of online spend. Retailers who can create succinct, easy-to-use virtual touch-points in addition to their physical stores enhance their opportunity to retain customers.

As well as mobile apps and websites, the growth of “click and collect” platforms is proving to be a successful offering to the market-savvy shopper.

An increase in the number of online shoppers has forced the quality of delivery service to the fore of the consumer’s attention. As such, those retailers offering a delivery subscription service have engendered a new criterion of customer loyalty.

Online retailers such as ASOS and Amazon offer such schemes, utilising low-cost, efficient delivery services to capture the attention of the some 22% of non-food online shoppers up taking these subscriptions.

While technology continues to reshape the industry, the importance of brand identity remains. Retailers are competing with peers on a global scale, as consumers can access products from around the world as easily as they can access domestic markets, through their smartphone or personal device.

In order to differentiate and retain customer engagement, retailers are reshaping and developing their brands in many ways. This has led to the introduction of “experiential retail”, with retailers such as John Lewis and Sweaty Betty opening up their stores to include dining, health and one-off experiences in store.

In addition, non-retail services are helping to drive footfall, creating an opportunity for retailers to entice consumers to spend longer in store and creating new synergies between the brand and consumer beyond the traditional product/service offering.

To this end, the design and layout of the store is equally as important as the design and layout of a brand’s virtual store, with user experience now a key contributor to customer loyalty.