Barclaycard and the British Retail Consortium (BRC) have recently released reports that indicate weak sales in the month of October. These reports suggest that retailers may have a challenging Christmas season ahead of them.
Barclaycard’s report reveals that consumer card spending grew by 3.5% last month. However, this growth rate was lower than the current rate of inflation, which means that the actual purchases made by consumers declined in real terms. The BRC/KPMG monthly report also shows that retail sales in October increased by just over 1% in value compared to the previous year. However, the BRC emphasizes that this increase is primarily due to inflationary pressures and does not accurately reflect an increase in sales volumes. In fact, consumers are purchasing fewer products per shop. Sales have declined in almost every category, whether online or in-store, as consumers adjust to reduced household incomes.
While Barclaycard’s October spending figures show improvement compared to September, with a growth rate of 1.8%, it is evident that the ongoing cost of living crisis continues to impact consumer spending decisions. Spending on essential items, such as fuel and groceries, saw a 5.7% increase compared to the previous year, higher than the 3.3% rise observed in September. However, this increase can be attributed to higher inflation rather than a genuine desire to purchase. Spending on non-essential items also experienced a slight improvement, with a 2.5% increase compared to the previous month’s 1% growth. Nevertheless, given the high inflation rate, this growth is relatively modest.
In October, a few sectors showed a slightly smaller decline compared to September. For example, clothing only experienced a 0.5% decline compared to a 4.1% decline the previous month. Department store sales also saw a smaller decrease of 1% compared to 3.5% in September. However, this is primarily due to the strong performance of these sectors in September 2021 as lockdown restrictions eased. Therefore, October’s comparatively milder declines are more a result of the easier comparisons from last year’s performance, rather than a significant improvement.
In contrast, pharmacy, health & beauty stores reported a positive growth of 3.8% in October, significantly higher than the previous month’s 0.8% growth. This suggests that consumers are still willing to purchase items such as makeup and toiletries, even as they spend more time at home. Categories classified as “insperience,” including digital content and subscriptions, as well as takeaways and fast food, also saw increases of 4.8% and 11.7% respectively. This trend can be attributed to the fact that many consumers are choosing to stay in rather than go out in order to save money during the autumn and winter seasons.
Looking ahead, Barclaycard’s research indicates that 48% of consumers plan to reduce their Christmas purchases this year in order to save money. Within this group, as many as 59% intend to spend less on gifts for family and friends, 44% plan to cut back on festive food and drink, and 42% will decrease their spending on Christmas parties and socializing. Additionally, 21% of consumers plan to set spending limits with their friends and family for gift purchases, while 19% have started their Christmas shopping earlier this year to spread out the costs. Furthermore, 10% of shoppers plan to buy more secondhand or pre-loved items to give as presents.
These reports suggest that retailers may face a challenging Christmas season as consumer spending remains cautious and focused on cost-cutting measures. Retailers will need to adapt their strategies to meet the changing needs and preferences of consumers.
Here are two useful links relevant to this article:
1. British Retail Consortium (BRC) News: The official website of the British Retail Consortium provides the latest news, updates, and insights on the retail industry.
2. Barclaycard for Business: Visit this link to explore Barclaycard’s solutions and services for businesses, including merchant services and card payment options.
