Rachel Parkin: Trends emerge in consumer spending

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AFTER all the media hype at Christmas, few retailers were excited about the prospect of January sales matching up to last year's.

AFTER all the media hype at Christmas, few retailers were excited about the prospect of January sales matching up to last year's.So this week's British Retail Consortium (BRC) figures that show a 1.1 per cent rise in same store sales on last year as well as a return to overall sales growth are a welcome sign of retail's resilience.

Even in some of the more difficult sectors, such as electricals, the January sales were better than expected, showing that shoppers will spend if the price is right, or the deal is too good to miss.

While for the millions still in a job, the benefit of lower mortgage payments and fuel bills is finally starting to show itself.

So are the BRC figures a light at the end of the tunnel? Hmmm, well, maybe if you squint, but beware of oncoming trains.

While the January sales generated some cash flow, it was at the expense of massive discounting, and once everyone went back to work the momentum slowed considerably.

I can't say that there are any hugely positive signs in the general economic outlook and with unemployment at its highest for 12 years, the increase in this sector will inevitably filter through to consumer spending.

Adding to the woes are the recent epic weather conditions, which mean February so far is not too cheerful, so whatever gains we had in January are slipping through retailers' fingers.

This coupled with the weakness of our sterling currency is fast becoming really critical – driving up prices to the point where some products are simply not viable.

So the knee jerk reaction to all this doom news is to expect an abrupt halt in consumer spending, with credit becoming harder to obtain and consumers being forced to live within their means.

While it's clear that less will be spent overall, as there's less available to spend, what are interesting to watch are the trends developing within the consumers' spending.

Initial trends emerging are:

At home is preferred to going out, at least within certain demographics. The home will become more of a centre for entertaining and watching movies. Also, in uncertain times, the security of a home becomes more important, so people are more likely to paint or decorate as they'll be spending more time at home than usual. While shoppers are increasingly price conscious, they are more prepared to shop around on price and deals. Convenience is becoming a luxury in itself.

The supermarkets are reporting consumers "trading down", eg a "finest" shopper might move down to an own brand range, but not necessarily jump ship to Aldi. Treats and luxuries are still on the shopping list, but they're of a lower value than in previous years.

So, what do these emerging trends mean for retailers?

Truthfully, there's no glaringly simple right answer, the experts extol us to continue advertising in a recession, while managing costs, issues of branding and not panicking.

Which is easy for them to say! So I'm advocating a more measured approach that's more viable for a small business concentrating on niche marketing, fabulous customer service and highlighting the value in our products.

Oh, that and having a word with him upstairs for some weather that doesn't involve snowboots and balaclavas. . .