‘Cautious consumers are battening down the hatches’ despite Christmas spending
Despite the increase in sales before Christmas, the festive period did not make amends for a challenging year of “sluggish retail sales growth”.
The British Retail Consortium said this was down to weak consumer confidence continuing to hold back spending.
UK total retail sales increased by 1.7% in December, against a growth of 6.9% in December 2022 and below the three-month average growth of 2.3%.
Food sales increased 6.8% on a total basis over the three months to December and for the month of December, food was in growth year-on-year.
Helen Dickinson OBE, Chief Executive of the BRC said this year looks to be another challenging year.
“The post-Christmas sales were unsuccessful in enticing spend in areas such as furniture and homeware, with households remaining cautious about making larger purchases,” she said.
“Sales saw a slight uptick in the week leading up to Christmas as consumers scrambled to purchase last-minute gifts, particularly online, due to the wet weather.
“2024 looks to be another challenging year for retailers and their customers, and spending will continue to be constrained by high living costs.
“Retailers will also have to juggle various cost pressures, including the rise to business rates this April. This will be compounded by other emerging issues, such as the disruption to shipments from the Far East via the Red Sea.”
UK Head of Retail at KPMG, Paul Martin added that the festive feel-good factor was lacking this year, with retailers facing a disappointing December.
“Christmas shoppers ditched clothing, jewellery and technology gifts, opting for beauty, health and personal care products, which, along with food and drink drove festive sales this year,” he said.
“Online sales remained in negative territory, although the decline was weaker than seen in recent months with sales down nearly 1% on last year.
“Retailers rolled out promotions that lasted longer and were deeper than last year and higher promotional activity amongst supermarkets saw grocery price inflation fall at its fastest rate on record in December. Whilst promotions are margin dilutive, retailers have done some great work in re-engineering supply chains to make them more cost effective, which has given more room to push ahead with discounting, and given the current environment, this is likely to stay with us for a while.
“Despite falls in inflation, an upcoming cut in national insurance rates, and some consumers having more money in their pockets this Christmas than last, the constant drip of economic challenges they’ve faced over the last two years has finally come home to roost.
“As we start a new year, cautious consumers are battening down the hatches and retailers can expect to see significant downward pressures on demand in the opening months of this year, which will ease off by spring if the economic conditions continue to improve and confidence slowly returns.”