With the run up to the festive season kicking off for many gift retailers this month, shoppers are gearing up for Christmas spending, despite facing a 9.3% increase in retail prices. While this is expected to drive up spend by 3.4% – taking it to £109.7bn in Q4 2023 – this still falls short of last year’s increase, say data and analytics company GlobalData, making it a second quarter of slowing growth in 2023.
“This year’s growth in retail sales is driven by inflation, which we expect to reach 9.3% for the year as a whole,” comments Nick Gladding, lead retail analyst at GlobalData. “Sharply higher prices mean shoppers will spend less in real terms than last year, choosing either to trade down or trim the number of presents they buy. Last year sales growth was supported by shoppers spending savings built up during the lockdown. But with those savings now depleted by cost-of-living increases and mortgage rate hikes, consumers are likely to shop more cautiously and more savvily.”
The company adds that continuing pressures on shoppers suggests that retailers will need to inspire consumers and emphasise value to encourage them to spend, with the company predicting that clothing and footwear will grow the fastest, with the sector proving resilient to cost of living cutbacks. Younger shoppers in particular are enjoying being able to dress up and experiment again, with a second trend focusing on building small collections of clothes that can be put together in different ways, which include premium pieces well suited to gifting.
The only other major sector likely to experience increased sales year-on-year will be health and beauty, says GlobalData, which is set to benefit from retailers stepping up their gifting and pampering offers, making them popular choices for shoppers on tight budgets.
“Dwindling savings, exacerbated by cost-of-living increases and mortgage rate hikes, are likely to shape consumers’ behaviour,” summarises Nick. “Shoppers will need to be savvier as they navigate higher prices. As a result, retailers will need to inspire shoppers and emphasise the value they provide to encourage spending.”
Top: Retailers will need to provide inspiration as well as value for money in the run up to Christmas says GlobalData.
