Recent reports indicate that discount-focused consumers in the UK have contributed to sluggish sales during the Golden Quarter. Both the monthly study by Barclays and the British Retail Consortium-KPMG report reveal that consumer behavior is not generating significant profits for retailers in the fourth quarter.
According to the Barclays report, card spending, including credit and debit payments, only grew by 2.9% compared to the previous year. This growth rate is lower than the latest Consumer Price Index (CPI) inflation rate of 4.7%. While there was a slight increase from October’s 2.6%, it is not significant considering the anticipated boost in sales during the Black Friday period.
Despite the overall slower growth, clothing and department stores experienced a rise in spending. Clothing stores saw a 2.8% increase, while department stores witnessed a 5% increase. Spending on non-essential items grew by 2.7% in November, surpassing October’s 2%, which is attributed to the early start of Black Friday sales and the arrival of colder weather. However, the extended sales period impacted Black Friday sales, with transaction volumes down 0.6% compared to the previous year. Surprisingly, Black Friday itself was not the busiest shopping day in November, with “Super Sunday” surpassing it by 13.5% in transaction volumes.
Consumer surveys reveal that 59% of shoppers are actively seeking out deals and discounts more frequently due to rising costs. Of this group, 56% are utilizing loyalty programs, and 40% regularly search for discount codes online before making a purchase.
The BRC-KPMG report highlights that total retail sales in the UK increased by 2.7% in November compared to the previous year, which is lower than the growth rate of 4.2% in November 2022. Non-food sales experienced a decline of 1.6% over the three months leading up to November. In-store non-food sales decreased by 0.8% in the quarter, while online non-food sales declined by 2.1% in November.
Helen Dickinson OBE, Chief Executive of the British Retail Consortium, acknowledges that Black Friday promotions started earlier this year to stimulate sales in November. However, the momentum of Christmas spending did not sustain throughout the month. Overall, non-food sales declined, with health and beauty products showing stronger growth.
Paul Martin, UK Head of Retail at KPMG, adds that despite the efforts of retailers during Black Friday, sales growth in November remained weak. The food and drink, health, personal care, and beauty categories drove growth, while jewelry and watches observed the largest decline in sales on the high street. Martin suggests that consumers are opting for more budget-friendly gifts due to the ongoing cost-of-living crisis.
With sales growth below 3% during two of the three months in the key shopping quarter, Martin believes that it has been a weak Christmas trading period so far. He warns that excess inventory not sold before Christmas may result in significant January sales, further impacting already tight profit margins. As challenges persist into the first few months of 2024, Martin predicts potential casualties in the sector, particularly for pure online players facing consecutive sales declines for over 28 months.
Useful links:
1. British Retail Consortium-KPMG Report
2. Barclays Report on Consumer Spending Growth
