Silvia Rindone, EY UK&I Retail Lead, comments:
“Despite indications that consumers might be delaying their Christmas shopping and many stores starting their January sales earlier to entice shoppers, retail sales volumes fell by 1% in December, traditionally the busiest time of year for many retailers. Food store sales volumes also saw a slight dip as consumers stocked up early for Christmas.
“The ongoing rail strikes and cold snap last month led many consumers to do their Christmas shopping in-store rather than online, with many potentially keen to avoid the disruption caused by postal strikes in the lead up to the festive season. As a result, there was a 2.9% fall in online spending values with the proportion of online sales falling to 25.4% in December from 25.9% in November.
“Trading updates from retailers over the last few weeks have shown that most – particularly the big four supermarkets – performed better than expected and experienced a strong festive peak in sales terms, although it’s worth noting that sales growth has been driven by customers spending more due to inflation rather than buying more.
“Many consumers also dipped into savings to ensure they had a memorable Christmas – the first restriction free one since the start of the pandemic. However, now that Christmas is over, consumers will be tightening household budgets and heading into 2023 with less of a financial buffer. Discretionary spending is most likely to be affected in 2023, with EY’s latest Future Consumer Index finding that over half (52%) of consumers surveyed said they will spend less on big-ticket items such as furniture, while 47% say they will spend less on clothing.
“In this challenging trading environment, retailers will need to ensure they are providing customers what they want, or risk losing favour altogether as we saw in the 2008 recession. As budgets become more strained, retailers will need to offer a compelling reason for customers to part with their hard-earned cash – whether that be a strong value proposition or by offering a unique in-store shopping experience.”