According to a recent report by Retail Economics and Metapack, the Christmas season in the UK is expected to see a significant decrease in spending on non-essential items compared to last year. The report predicts a £4.4 billion decrease, which translates to a 22% drop year-on-year. This decline can be attributed to the cost-of-living crisis, which has left consumers with less disposable income to spend.
It’s not just the UK that will be affected by reduced spending during the holiday season. Globally, spending on non-food items during this peak period is expected to decrease by over £36 billion ($46 billion) across eight markets, including the UK, US, Germany, France, Spain, Italy, Canada, and Australia.
Among the various retail sectors in the UK, clothing and footwear retailers are anticipated to be hit the hardest. The report reveals that 26% of consumers plan to cut back on apparel spending. Lower-income individuals, in particular, are expected to reduce their overall spending during Black Friday and Christmas.
This challenging outlook for retailers comes at a time when they are already dealing with higher energy bills, labor costs, and increased prices for goods. Many businesses have been forced to shorten their trading hours as a result. It is anticipated that 20% of shoppers will spend less on homewares, electrical goods, and toys. The rising cost of living has left 38% of shoppers feeling distressed and at a high risk, while a similar percentage describe themselves as secure but concerned.
Interestingly, despite consumers looking to reduce their spending, retailers are forecasting growth for the peak season. Andrew Norman, General Manager of Metapack, acknowledges the disconnection between retailer expectations and consumer sentiment. He emphasizes the importance of carefully navigating this economic climate to bridge the gap.
Physical retailers face an additional challenge as footfall is expected to decrease this year. In December, nearly 20% fewer shoppers are projected to be out and about compared to pre-pandemic times. The numbers are only expected to be 4.2% higher than 2021 when Covid restrictions still deterred many from visiting stores. October and November footfall is also predicted to be worse than last year, with a decrease of 2.1% and 2.7%, respectively, according to Springboard.
Overall, the holiday shopping season is expected to be tough for retailers, with significantly reduced spending on non-essential items. The combination of the cost-of-living crisis and consumer sentiment is driving these cutbacks, adding more pressure to businesses already grappling with rising costs. As footfall numbers remain low compared to pre-pandemic levels, retailers must carefully navigate these challenging times to maximize their chances of success.
Useful Links:
1. Retail Economics
2. Metapack
