Recent reports indicate that fashion took a backseat in the minds of UK shoppers during the festive month of December. Both Barclays and the British Retail Consortium-KPMG released findings that shed light on the priorities of consumers at this time. It seems that shoppers remained cautious, prioritizing discounts and focusing on planning future holidays and leisure activities rather than purchasing new clothes for the holiday season or to combat the winter chill.
According to Barclays, consumer card spending only grew by 2.3% year-on-year in December. This growth rate was lower than the Consumer Prices Index Including Housing (CPIH) inflation rate of 4.2% and November’s growth rate of 2.9%, despite December being a traditionally significant month for festive spending. The report revealed that specific retail spending struggled to maintain the momentum gained in November through early seasonal discounts. However, spending in entertainment (+12.3%) and travel (+14.1%) saw growth as consumers booked experiences and getaways for the upcoming year. This indicates potential good news for the fashion and beauty sectors, as individuals are likely to shop for vacation-related items at some point. However, during the Christmas season, these sectors did not experience a positive impact. Spending on non-essential items only saw a minor increase of 2.5%, driven by festive activities and celebrations that boosted the hospitality and leisure sector (up 8.9%).
When it comes to fashion spending, transaction volumes saw a meager increase of 0.2%. Despite this slight uptick, the actual spend decreased by 2%. This aligns with the weak festive season experienced by JD Sports, as Barclays highlighted a 9.7% decline in transactions at sports and outdoor retailers and a 6.2% decrease in spend. Health and beauty transactions were down 1.3%, although there was an actual increase in spend by 3.8%. Department stores saw a 3.7% increase in transactions, but spend fell by 0.2%. Discount store transactions experienced a significant decline of 12.7%, with spend dropping by 10.2%. This is somewhat surprising, as discount stores would typically be expected to perform well in a challenging economic environment. These numbers for fashion and department stores contrast with the previous month when they were in positive territory. Barclays attributes this shift to retailers starting their festive promotional activity earlier, prompting Britons to shop for Christmas party outfits and gifts in November to take advantage of the best deals.
On the other hand, the figures from the British Retail Consortium-KPMG show that retail sales increased in December overall, but when accounting for inflation, there is likely a decrease in volumes. The data indicates that total retail sales in the UK rose by 3.6% in 2023 compared to 2022. However, non-food sales saw a decline of 0.1% for the year. In December specifically, total sales increased by 1.7%, but non-foods fell by 1.5% on a total basis over the three months leading up to December, trailing behind the 12-month average. In terms of online non-food sales, there was a 0.8% decline in December, compared to a 3% decline in December 2022. This decline was less severe than the three-month decline of 1.7% and the 12-month decline of 2.8%.
Paul Martin, UK Head of Retail at KPMG, commented on the findings, stating that many retailers faced a disappointing December due to a lack of festive cheer. Shoppers opted for beauty, health, and personal care products, as well as food and drink, over clothing, jewelry, and technology gifts. Online sales remained in negative territory, although the decline was less pronounced than in previous months, with sales down nearly 1% compared to the previous year. Martin noted that despite falling inflation, upcoming cuts in national insurance rates, and some consumers having more disposable income this Christmas, the cumulative economic challenges of the past two years have finally taken their toll. As the new year begins, cautious consumers are tightening their budgets, and retailers should expect significant downward pressure on demand in the coming months. However, if economic conditions continue to improve and confidence slowly returns, these pressures may ease off by spring.
Links to related articles:
– Reuters: Fashion shopping takes a back seat for UK shoppers amid cautious spenders
– BBC: Fashion takes a back seat as cautious UK shoppers prepare for Christmas
