Customers and retailers are set to face several hurdles in the oncoming year, the British Retail Consortium (BRC) warned. Rising living costs have led to a disappointing Christmas period as consumers held back from making lavish purchases due to a squeeze in household budgets. Retail sales increased by just 1.7% in December, significantly lower than the 6.9% seen the year before, according to the BRC-KMPG retail sales monitor. The figures indicate that households bought fewer goods despite spending more in nominal terms.
“The festive period failed to make amends for a challenging year of sluggish retail sales growth, as weak consumer confidence continued to hold back spending,” Helen Dickinson, chief executive of the British Retail Consortium, said. The post-Christmas sales failed to draw in customers to spend more on bigger-ticket items. Dickinson added that discounting in the traditional post-Christmas sales was “unsuccessful in enticing spend in areas such as furniture and homeware, with households remaining cautious about making larger purchases”.
Despite the downfall in the festive period, there was a slight boost a week before Christmas with the purchasing of last-minute gifts particularly online, due to the wet weather. The most popular purchases were beauty products along with health and personal care items, while clothing and jewellery were the least favourable, the BRC said. Paul Martin, UK head of retail at KPMG, said “cautious consumers are battening down the hatches”, so retailers should expect demand to be down in the first few months of 2024.
Despite falls in inflation, which measures how quickly prices rise, or recent cuts to National Insurance rates, “the constant drop of economic challenges [consumers] have faced over the last two years has finally come home to roost,” he said. Clothing and department stores saw sales drop by 2% last month after a spike in November. This was partly due to retailers starting their festive discounting earlier on. Diane Palumbo, sales and marketing director at Skiworld, recently told the BBC’s Wake Up to Money programme that trade had picked back up a little bit in recent months. She said that it “could be better” though, with “some signs of the cost-of-living crisis in people’s future decisions”.
As shoppers held back on buying presents over Christmas, data from Barclays suggested customers prioritised saving their money for travel, tickets for gigs and festivals instead. Spending in the entertainment sector went up over the festive season. The increase in holiday bookings, Glastonbury ticket sales and cinema releases such as Wonka all helped boost spending in December. There was a 12.3 per cent increase in sales following a 1.7 per cent decline in November. Consumer card spending grew 2.3% year-on-year in December, well below November’s growth of 2.9%. Karen Johnson, head of retail at Barclays, said that, while grocery and retail spending “didn’t see as much of an increase as we might have expected during the height of the festive season”, “hospitality and leisure businesses will be encouraged by December’s strong growth”.
Streaming and digital services drove a 7% rise in UK music, video and games sales to £11.9bn, the Digital Entertainment and Retail Association said. Video was the fastest-growing sector with a sore of subscriptions on streaming services including Netflix, Amazon Prime Video and Apple TV. Sales of CDs rose last year for the first time in two decades. The music industry saw a boost in sales, rising by 9.6% to a whopping £2.2 billion – its highest level since 2002. Spotify, Amazon, YouTube and Apple also increased subscription revenues. The biggest-selling album was The Weeknd’s The Highlights, although Taylor Swift’s album releases dominated the market, while the best-performing track was Miley Cyrus’s Flowers.