Credit Crunch Is Yet To Come

With house prices in sharp decline I was surprised to see the latest figures from the IMRG Capgemini e-Retail Sales Index. They show that UK shoppers spent over £26.5 billion online in the first six months of 2008 despite the credit crunch – up 38% on the £19.2 billion recorded for the first half of 2007. Capgemini and IMRG report that for the first half of 2008, 17p in every pound was spent online.

This is a big headline for retail but reading between the lines is this rise due to techno-savvy consumers going through a natural progression from bricks and mortar businesses to e-retailers. Is it because online shopping is ideal solution for our time-poor society. Could it also be that around half of UK retailers did not have an online store at the beginning of 2007? Oh and then there is the credit crunch, where consumers will search out deals online as opposed to the highstreet.

So will online still be booming in the coming 12 months? There is no question that consumers are changing their shopping habits which can only benefit online retailers but will they have the cash to spend?

This was from moneyweek: "In Britain, one of the key measures of money, 'adjusted M4', which covers loans to UK businesses, has actually shrunk by 3.5% over the three months to May, according to Bank of England stats. What's more, over the last four months, mortgage approvals have almost halved, said yesterday's BBA figures. There's always a bit of a time lag before this lot hits the high street. But when it does, as Vicki Redwood says, "the consequences of this squeeze on capital for the real economy could be devastating"."

In other words, the real credit crunch is about to begin, so we have not even started to see the impact on the highstreet. That means a brutally sharp recession, with much lower company profits and many more job losses. And your bank manager could be about to start getting extremely nasty.

With this said I think there is a big opportunity for more niche retailers who offering something different to the consumer.

Google Digs Digg

Google's on and off talks with Digg have been back on in a big fashion for the last 6 weeks. The 2 firms have allegedly signed a heads of agreement and are close to a deal that may bring Digg under the Google reports property.

The purchase price is in the $200 m. range, asserts one source. The corporations are now in last talks according to our sources, while it may be two weeks before it closes. And whilst the major deal points have been decided on, the purchase could still fall apart. Microsoft, which was formerly interested in the company, might be ready to step back in at a lower price. The majority of Digg's money comes out of a 3 year ad deal with Microsoft, that may be cancelled on a sale to Google.

Heinz Don't Do It!

I keep an eye on retail sales and this release caught my eye. Heinz are planning on removing the word "baked" from its beans range in a bid to reposition it as a healthy snack and bring the brand up to date. They changed the word beans to beanz some time ago to work with their slogan Beanz Meanz Heinz.

If like me you LOVE baked beans, you will have to keep an eye out as the packaging will change. Beloved baked beans will now just be Heinz Beanz with 3 new pack designs. They will retain the turquoise background and black logo but it will introduce pictures of the beans for the first time. Hmmm i wonder if they got the idea from here...

You will always be baked beans to me!

Sign Of The Times...Well What Did You Expect.

Some of my blog postings in the past 18 months commented that a slowdown in the housing market was on the cards, giving a knock-on effect on consumer spending in certain areas online mainly retail. In fact we thought it should have all come to a head in Q4 2005 but the market pushed back and as a result will have a bigger effect on the current 'crash'.

InternetRetailer.com's survey released stats which showed that just over 35% of online retailers surveyed "anticipate sales will grow by at least 30% over last year" with "only 17.4% of online retailers plan on scaling back their businesses this year." Nearly 31% of online retailers surveyed will work to save on general and administrative expenses, 21.8% plan to spend less on advertising and marketing and 21.8% will reduce fulfillment expenditures. Less than 11% plan to cut back on technology.

With rising food prices and increases in oil/fuel bills with no signs of increases in wages are retailers actually being quite bullish and really in for a crash in online sales. The impact of the credit crunch on brits has now hit home but where and what will they buy online?

Shoppers are looking for cheaper choices for food and clothing so in theory could drive people online to shop for more bargains. The simple fact is the next 3 years at least will be a rough road for retailers especially if houseprices do fall in excess of 35% placing most in negative equity.

Having worked for M&S for a few years I have great respect for their CEO Stuart Rose who has been upfront that a slowdown in the market was invevitable. M&S are now seeing the repercussions by seeing a 5.3% decline in sales over the past 3 months. Over the coming months this will be a story on most mainstream retailers.

Industrys to benefit in this market could be the gambling sector, where people get desperate and gambling their pennies to try and make pounds!