Retailers set for a rocky ride at Christmas as sales growth forecast to be less than 2 per cent
With numerous shops already entering into the festive spirit, many of Britain’s retailers are gearing up for their busiest season of the year. However, market analyst Mintel warns that against a backdrop of rising inflation and weakening consumer confidence, retail sales will see growth of less than 2 per cent in December, reaching £44.6 billion.
According to the findings, many consumers believe that Christmas this year may be more costly than they’re used to. As far back as January 2017, 43 per cent of people who bought gifts last year were already worried that the Brexit vote would mean that Christmas 2017 would be more expensive. And Mintel’s Brexit-related research shows that concerns over the cost of living have only intensified since then.
Indeed, Mintel’s Consumer Confidence tracker highlights that financial concern has grown over the past year for many UK shoppers. While in October 2016 34 per cent said they felt financially confident that they would be financially ok in the next year or so, this fell to 31 per cent who said the same in September 2017. Additionally, while in September 2017 28 per cent of consumers said they were worse-off than they were a year ago, this is up from 20 per cent who said the same in October 2016.
“The natural response to falling real incomes would be to cut back on spending. Added to the tough comparison against last year’s boom, retail sales would be expected to be lower this Christmas. But we don’t feel that we can justify such a negative forecast. Retail sales are holding up exceptionally well, even if they are largely financed by increased borrowing. It seems too close to Christmas for there to be a significant fall in spending this year. We also believe that people may well feel that next year will be tough, so they will have a good time now before reality strikes,” says Richard Perks, director of retail research at Mintel.
When it comes to individual spend, of those who bought gifts last Christmas, the average shopper forked out £367 on gifts, with 21 per cent saying they spent more than they had the previous year.
Meanwhile, Black Friday has also in recent years become an unmissable event for many shoppers in the UK. According to Mintel research, 32 per cent of Brits bought items during last year’s Black Friday promotions, while a further 20 per cent browsed products but did not buy. Unable to resist a bargain, over half (52 per cent) of those who bought goods said that they purchased items they didn’t plan to on Black Friday and 39 per cent said they purchased items during the event as they were worried prices were going to rise in 2017.
On the other hand, it seems Black Friday fatigue may have set in for some. Of those who browsed products during Black Friday but did not buy, over a quarter (28 per cent) said that the discounts were not genuine. Meanwhile, of those who bought Christmas gifts on Black Friday or Cyber Monday in 2016, 49 per cent said they bought less on Black Friday than they thought they would, while 34 per cent bought gifts that they later regretted.
While Black Friday may be losing its spark for some, Mintel finds that Black Friday is increasingly being powered by electrical goods purchasing. One in four (24 per cent) of Brits bought electrical items during Black Friday, while only 17 per cent bought other non-food products.
“It is likely that 2016 marked the peak for Black Friday shopping. Black Friday has been a major distorting factor in Christmas demand over the last few years and there are some signs of disillusionment creeping in. Discounting in the run up to Christmas is usually a sign of distress and those who do take part will be retailers who are having trouble selling at full price,” concludes Perks.