Decidedly mixed weather conditions over the festive period proved to be an appropriate metaphor for retailers' 2023 Christmas trading results, with the former also having a marked impact on sales figures during this period.
Data from the British Retail Consortium (BRC) highlighted a5% year-on-year drop in footfall across the UK in December, also down from -0.7% in November, as a period of persistent rainfall during the run-up to Christmas played a prominent role in keeping shoppers online instead of on the high street.
More data from the BRC reported a1.7% increase in overall UK retail spending in the five weeks to 30 December 2023 – a significant cooling of activity versus 6.9% of spending growth seen in December 2022. However, accounting for the effects of inflation means that this 2023 data represents a drop in sales volumes and provides further validation of consumer belt-tightening while the inclement economic conditions persist.
Of course, the headline figures mask pockets of robust performance across the industry. Discount grocer Lidl topped the grocery table with a12% increase in year-on-year four-week sales to 24 December 2023, also citing a surge of 4.5 million more customers in the run-up to Christmas. This reflects our assertion in the recentAlixPartners Critical Consumer study that shoppers will be more than willing to trade down to lower-cost brands where product quality and value still makes the grade in order to balance the household books. Other brands to post double-digit year-on-year sales growth according todata from Kantar included women's fashion brand Sosandar, Fortnum & Mason, and Cotswold Company.
A forecast for reduced spending in 2024
Amid a mix of profit warnings and, in some cases, improved financial outlooks for 2024, the consensus remains that these are challenging times for retail – and the consumers upon which they rely so heavily. Consumer confidence is brittle against the backdrop of elevated interest rates and an uncertain economic future, with discretionary spend dialled back to counter more than 18 months of inflationary pain.
Our Critical Consumer study suggests the tough trading environment will continue in this calendar year. More than a third (37%) of respondents said they plan to spend less overall in 2024, versus 17% expecting to spend more. This significant net decline suggests that there is some way to go yet before sentiment shifts to a more positive position, and retailers must be relentless in their pursuit of communicating – and delivering on – their value proposition to previously loyal customer segments. Trade-offs made to manage household costs and discretionary spending more effectively will likely hit mid-market players hardest, and these brands must battle it out for their share of a diminishing consumer wallet.
The wet winter weather has dampened optimism amongst many retailers for the year ahead. While sunnier economic climes will return, for now weathering the storm remains the immediate priority.
Read the full AlixPartners Critical Consumer 2024 study
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