The latest reports from Barclays and the BRC-KPMG reveal that UK January spending was weak, with clothing sales experiencing a dip despite clearance sales. Both reports indicate that consumers are being cautious and times are tough.
Barclays’ report shows that although consumer card spending in January had a higher annual rise compared to December, it still fell below inflation. Harsh weather conditions, including storms Isha and Jocelyn, deterred many shoppers from visiting the high street and instead led them to browse the January sales online. While Britons are expected to spend slightly more this Valentine’s Day compared to last year, this is likely due to higher prices rather than an increase in spending desires.
The numbers demonstrate that consumer card spending grew by 3.1% year-on-year in January, which is lower than the latest CPIH inflation rate of 4.2%. Spending on essential items saw an increase of 4.2%, but spending on non-essential items only experienced a growth of 2.6%. Rising household bills have prompted 43% of consumers to cut down on discretionary spending, with many tightening their belts after the festive season.
The inclement weather in December and January had an impact on consumer interest in visiting physical stores, resulting in more shoppers choosing to peruse the post-Christmas sales from the comfort of their own homes. On Boxing Day, face-to-face retail spending witnessed a 10.9% decline year-on-year, while online retail spending saw a 10.7% increase.
In January, a significant 57.6% of all retail shopping (excluding groceries) was conducted online, marking the highest share of online spending in this category since February 2022. However, clothing stores experienced a slight decline of 0.6%, though this is an improvement compared to December’s 2% drop.
On the other hand, the BRC-KPMG Retail Sales Monitor for January revealed that total UK retail sales only increased by 1.2% year-on-year. The report also highlighted a decline in total non-food sales by 1.8%, including a 4.2% reduction in online sales.
Helen Dickinson, CEO of the BRC, explained that easing inflation and weak consumer demand contributed to slower retail sales growth. The milder temperatures negatively impacted clothing sales, especially for winter clothing and footwear. However, health and beauty products continued to perform well. Linda Ellett, UK Head of Consumer Markets, Leisure & Retail at KPMG, added that low consumer confidence still affects sales, although health and beauty products, sports, and travel equipment experienced an increase.
Overall, these reports shed light on the challenges faced by the UK retail sector in January, with weak spending and cautious consumers. Online shopping continues its upward trajectory, but clothing sales have particularly suffered due to adverse weather conditions and subdued consumer demand. Retailers will need to adapt their strategies in order to navigate these challenging market conditions.
Useful links:
– https://www.retailgazette.com/blog/2022/02/bad-january-for-uk-retail-sales-as-deflated-prices-fail-to-entice-shoppers
– https://www.bbc.co.uk/news/business-60254890
