UK officially out of Recession

The UK is officially out of recession, with GDP growing a tenth of one percent in the period October to December 2009. That’s a disappointment to economists as the forecast was for four tenths, but for the country as a whole it’s still a positive indicator that the economy is starting to recover.

One worry is that the economy is still fragile and there’s the possibility of a “Double Dip” recession if the recovery stalls and GDP shrinks in the first quarter of 2010. Over the last year the economy has contracted by around six to seven percent, and without a recession growth should have been around four percent so the country has seen a loss of around ten percent of GDP over the course of the last year.

Exiting recession may be less significant for much of the general population. Companies who have seen their balance sheet shrink won’t be offering pay rises any time soon. Personal finances are still precarious for much of the country and it’s likely that interest rate rises or increased personal taxation as governments try to balance the books will continue to put pressure on consumers and businesses alike.

There is some encouragement for online retailers. Unsurprisingly with the government scrappage scheme, motor traders have contributed to the increase in GDP, but retail was an equally large sector which assisted in the country exiting the recession.

The next quarter will be a valuable indicator as to just how well the economy is recovering. It’s not surprising that retail sales are strong in the run up to Christmas, now it’s essential that consumers carry on spending in the first quarter of the New Year, which once the sales are over, is the time of year credit card bills from the holiday spending have to be paid.

“According to research undertaken by PayPal over one in six adults claim to now save up for things they want to buy rather than use a credit card which is what they would have done before the downturn.

Equally important over half of shoppers have become more price conscious and are much more likely to bargain hunt than make impulse purchases.”

At the same time as careful purchasing the British Bankers Association reports that households’ unsecured borrowing contracted throughout the year, particularly on personal loans. Consumers are looking to cut debt and purchase wisely, especially the 17% of men who are more likely to negotiate with retailers since the recession started.

For online retailers the picture is better than for their offline counterparts. Firstly their cost base is generally considerably lower and secondly their potential audience is considerably larger. Exports from the UK are particularly attractive at the moment due to the low value of Sterling (which dropped to €1.14 and $1.61 on the news of lower than expected GDP growth). Currently products from the UK are particularly attractive to mainland Europe and all online retailers should be marketing to overseas customers and ensuring that simple steps such as making sure shipping costs are displayed to European consumers.

In addition to overseas sales online sellers should be considering holding a sale. This applies both to websites and to eBay where Markdown Manager can be used. A sale used in conjunction with your email marketing to drive traffic is an effective way of encouraging buyers to revisit your products. With people looking to negotiate on price any discount offered is an encouragement to purchase.

One sector that online merchants should address is the Amazon marketplace. Having just reported their fourth quarter earnings their growth rate is 42%. That’s an amazing growth rate and with Comscore reporting at year on year ecommerce growth at around 3%, Amazon is by far outperforming the market. (To put it into perspective eBay reported growth of around 4%).

Amazon, at least in the UK, has hardly got started; currently they’re still well known for media – books, CDs, DVDs. With a raft of categories ranging from Home and Garden, Toys, Sports and Leisure and DIY there’s every indication that Amazon will continue to grow. Online merchant should be benefitting from Amazon growth by becoming a third party seller on the site if they’re not already.

The economic outlook is improving for the UK, but the turnaround is lagging behind to Germany, France and much of Europe. Online merchants should look to Europe and Amazon for growth, and continue to market to the UK with value propositions and where appropriate use discounting.