A Resilient Retail Pep Talk – The UK Recession

Catherine Erdly: Welcome to the resilient retail game plan. Before we get into today’s episode, I just wanted to remind you that today is the day of Retail ROAR my free online summit for e commerce sellers, brands, and independent retailers. I am so excited about this. This has been something I’ve worked on for the last five months and it’s finally happening today.

If you don’t have your free ticket, then please head over to retailroar.co.uk. That’s retailroar.co.uk. Get your free tickets and come along, join us. The interviews are being streamed today and tomorrow into a dedicated Facebook group, and there will be time to watch replays. If you can’t make it live, but you have to be signed up to get them.

So head over to retailroar.co.uk. Check out our incredible lineup and I’ll see you there. 

So today’s podcast is a pep talk. And the theme of the pep talk today is that the UK is officially in recession. So you might think this is an odd theme for a pep talk, but what I wanted to really highlight in this episode is that it can feel really overwhelming and really demotivating when you hear headlines a few that I plucked, for example, are UK officially in a recession after Christmas sales collapse, it can feel a very worrying time as a business owner. And we’ve also had other high profile bad news recently in the press, for example, the body shop going into administration, which a lot of people are also feeling demotivated about.

And so what I wanted to do with this episode is dig in a little bit into the data and the stats behind the headlines, talk it through from my perspective. And then also think about some reasons to be optimistic and some things to do instead of letting it overwhelm you. 

Welcome to the Resilient Retail Game Plan, a podcast for anyone wanting to start, grow or scale a profitable creative product business with me, Catherine Erdly. The Resilient Retail Game Plan is a podcast dedicated to one thing, breaking down the concepts and tools that I’ve gathered from 20 years in the retail industry and showing you how you can use them in your business. This is the real nuts and bolts of running a successful product business, broken down in an easy, accessible way. This is not a podcast about learning how to make your business look good. It’s the tools and techniques that will make you and your business feel good.

Confidently plan, launch and manage your products and feel in control of your sales numbers and cash flow to help you build a resilient retail business.

Let’s Define What Recession Means

Catherine Erdly: So let’s dig in to the numbers behind the headlines. The term recession is a very specific economic term and it refers to when the economic output of the country contracts for two consecutive quarters or more. And that’s exactly what happened. It turns out that in 2023, the fourth quarter contracted by 0. 3%. And therefore, because the third quarter had also contracted, that this means technically the second half of 2023, the UK economy was in recession.

When I was doing my trends and my outlook work and things like that. At the end of 2022, there was originally forecast to be a recession in 2023. Then they changed it and it said we were just going basically miss the recession, but what these latest figures are suggesting is that we did in fact dip into a recession.

The recession is like the scary word for so many people. It can put a lot of fear into business owners and it can make them feel really uncomfortable. I’m really concerned. I’m really worried. But, in this particular case we’re kind of finding out about it after the fact, which is interesting.

And when you dig into something like the, you know, Christmas sales collapse, then that also feels really scary. And therefore I dug into December sales a little bit more detail. December sales were minus 3. 3 percent on the year. And some of that was due to a bigger shift as always into November because of Black Friday and increased promotional activity.

So it wasn’t all about Christmas spending being completely, you know, when you hear the term collapse, for example, you know, the headline was UK officially in a recession after Christmas sales collapsed. It can feel really overwhelming and really concerning, but really, I’m not saying that this isn’t a considerable amount of money that it will have decreased by in absolute terms.

But when you hear the word collapse, it sounds a lot more scary than minus 3. 3%. So Yes, we were in a recession at the end of 2023. And yes, there was a decline in December.

Reasons I believe you can be optimistic despite the headlines

Catherine Erdly: But here are three reasons that I believe we can actually be optimistic despite the headlines. First reason being that just because we entered into a recession, it doesn’t mean that it will last a long time.

In fact, there is evidence to suggest or the current outlook for the first quarter of 2024 and then looking forward into 2024 is that it’s entirely possible that we will basically come out of a recession almost immediately by the time we figured out that we were in a recession, we’re going to be out of it because the indicators in January 2024, so this January just gone was that the retail sales actually saw a rebound.

So they were plus 3. 4 percent and almost back to sort of November performance with December having been a bit of an anomaly. 

There are other economic indicators that seem to be really positive. For example, unemployment being relatively low and wages are for the first time in a while, rising faster than prices. So inflation has been coming down, wages are rising faster. And so Again, I don’t think anybody is going to say that 2024 is going to be a banner year, but it does look like there will be growth in 2024. 

So this idea of recession is almost like a historic term. And it’s entirely possible that when we get to the end of the first quarter and then they do all their number crunching and work out exactly what the economic output was, that it’s possible that they will no longer be in recession.

So we’re finding out about it, as I said, almost. After it’s happened. So I think that is a reason to be optimistic. 

As I said, it doesn’t help with things like consumer confidence when words like recession get bandied around. Political uncertainty is also not great for consumer confidence. And that obviously is an element of that this year.

But I think all in all, it can feel really overwhelming and really frightening to hear this term. But ultimately, it looks like it’s going to be something that is in the past tense. 

What actually happened to the Body Shop

Catherine Erdly: Also just on the note, if you’re interested in the body shop story, I would have a dig into that too, because I think that does feel like a really overwhelming and upsetting story about yet another beloved retailer failing.

But actually when you go through it step by step and you look at what happened to it and how it changed hands, then it was bought by a Brazilian company called Natura. They also bought Avon in 2019, which just before the pandemic hit, which left them with a lot of debt. They ended up selling off the body shop to a company that specialized in transitions or failing businesses.

And that new owner only had them for five or six weeks before they decided to put them to administration. So again, there’s, backstory there as well. So if you are sitting there thinking, well, the body shop couldn’t do it and we’re in a recession and therefore it’s all going to be too difficult.

And is anyone even buying anything more? Just remember that things that go into making really good headlines don’t always really reflect the economic reality of what’s happening. Not to say that it’s easy, not to be a Pollyanna about this and to just say, oh, it’s all fine. But I think it’s really worth drilling in and interrogating some of these stories before they become too harmful in our own minds.

Five Things to Do to Beat Feeling Overwhelmed

Catherine Erdly: So five things to do then instead of letting it overwhelm you. 

Focus on What You Can Control

Catherine Erdly: So first thing I would say is focusing in on what you can control. Often situations like economic shifts, recessions, they can feel really overwhelming because they’re not something that we as individuals have any control over and so, if you can then shift your focus into your circle of control, this is a concept that is shared by steven covey in his book seven habits of highly effective people, and as business owners the more time that we spend in that circle of control the better. So that’s about knowing your numbers. That’s about knowing What’s going on in your own business? it’s about making your business as good as it can be as opposed to spending that time getting distracted or, or demotivated by external factors. 

Keep Your Business Nimble

Catherine Erdly: The second thing I would say, when there is uncertainty, and although I don’t believe we’re going to be in a recession for all of 2024, in fact, we may even come out almost immediately that people have realized we were in it.

Then if you’re ever feeling uncertain, it makes a lot of sense as a business owner to keep your business as nimble as possible to as agile as possible. And for me, for a retailer, that is often to do with your stock. Now, more than ever, it’s important to keep your stock under control, to not have too much of your money tied up in your stock so that you have got some flexibility. So that would be my second point of things to focus on. You’ll see, as we go through, there’s a theme that a lot of these things that I’m talking about do sit in your circle of control. 

Understand Your Customers

Catherine Erdly: Point number three, talk to your customers. Know what’s going on for your customers. Know what’s going on for them. Know what they want to hear from you. Know what their behaviors are shifting. Know what’s on their mind. Stay close to your customers. No matter what the economic environment, no matter what’s going on in the world, knowing your customers, talking to them, really understanding them is only going to help you as a business owner.

Take Action!

Catherine Erdly: Number four is to take action. Again, if you think about the cycle of doom is a concept that I’ve came up with to describe the impact of, of loss of confidence on you as a business owner. And it basically goes like this. You lose confidence, you take less action. So your sales drop. So you lose confidence. So you take less action. So your sales drop. And you go around and around and around and so get yourself out of that cycle of doom. Make sure you are taking action. Make sure that you are Really thinking about your circle of control, what you can do, what you can do to, to move things on and focusing on that instead of the things that you can’t control, the things you may be concerned about, like the economy, but the things that those are things that you personally cannot control to make sure you’re taking action every day, make sure you’re not getting stuck in that cycle of doom and taking less action.

Get Support

Catherine Erdly: And then point number four is get support. Really think about where you’re spending your time acting, what they’re talking about, and make sure that you’re somewhere that is positive, that is uplifting, and that is really allowing you the opportunity to To believe in yourself and your business.

You want to be in places where it’s optimistic. You want to get support, expert help when it comes to running your business. You also want to have that environment where you can talk to other people going through the same thing as you so you can share your worries and concerns and get ideas from what other people are doing too.

Don’t Forget to Join Retail ROAR

Catherine Erdly: So on that note, If you’re feeling concerned about the UK being in recession, if you’re feeling nervous about the economic outlook, come along and join Retail Roar. If you haven’t done so already, head over to retailroar.co.uk. That’s retailROAR.co.uk, and grab your free ticket. We have got so many amazing speakers for you.

From Lucy Greenwood, founder of Lucy & Yak, to Brie Read, founder of Snag Tights, Jo Tutchener-Sharp, founder of Scamp & Dude, Eleanor Bowmer, people who have built these amazing businesses. You’ve seen real growth in the last year. They’re going to be sharing what they’re doing, what their teams are doing, what they’re thinking about in terms of growth.

And we have a whole raft of experts as well, who are going to be sharing best practices, tips, ideas. We’ve got the Etsy trend expert herself, Dayna Isom Johnson, coming to share product trends. We have got so many different people talking about email marketing, wholesale, selling online, all of these different things.

So you’re going to have so many tips and ideas to help you feel motivated and brush off your concerns about the economic climate. Get really focused on what’s ahead. So come along and join us.