According to analysts at Global Data, the upcoming Christmas sales in the UK are expected to be impacted by inflation. Despite prices being 9.3% higher, consumer spending is predicted to rise by 3.4%. This significant gap between rising prices and rising sales is not favorable for the retail sector, which has been grappling with the ongoing impact of inflation.
The latest report from Global Data also reveals that this projected increase falls short of last year’s growth, indicating a second quarter of slowing growth in 2023. As prices continue to rise, shoppers will need to be more conscious of their spending habits. However, despite these challenges, the 3.4% increase is estimated to bring retail spending to £109.7 billion in Q4 2023. While this represents a substantial rise, it is only about half of the 6.2% increase observed last year when Covid-19 restrictions were eased.
One positive aspect within the retail sector is the fashion and beauty industries. It is expected that clothing and footwear will experience the fastest growth among non-food sectors. This is noteworthy, considering the difficult comparison to last year when shoppers invested in new outfits to compensate for canceled celebrations during the pandemic. Younger consumers, in particular, are relishing the opportunity to dress up and explore their personal style once again.
Another trend influencing consumer behavior is the focus on building capsule wardrobes, which consist of small collections of clothes that can be mixed and matched in versatile ways. This often includes premium pieces that are ideal for gifting. Beauty products are also expected to see increased sales as retailers enhance their gifting and pampering offers. The affordability of many beauty items makes them an attractive choice for shoppers on tighter budgets.
Nick Gladding, Lead Retail Analyst at GlobalData, explains that the projected growth in retail sales this year is primarily driven by inflation. However, the surge in prices means that shoppers will spend less in real terms compared to last year. They may opt to trade down or reduce the number of presents they buy. Furthermore, the depletion of savings due to rising living costs and mortgage rate hikes will likely make consumers more cautious and selective in their shopping. Retailers will need to inspire shoppers and emphasize the value they offer to encourage spending.
Overall, while the UK Christmas sales forecast may not be as robust as in previous years, there are still opportunities for growth in the fashion and beauty sectors. Retailers will need to adapt their strategies to cater to changing consumer behavior and ensure they provide value for money to drive sales during the festive season.
Useful links:
1. BBC: UK Christmas sales likely to be hit by inflation, says GlobalData
2. GlobalData: Festive Sales Forecasts (relevant only if applicable)
