High inflation rather than strong volumes will drive Christmas spend in the UK this year, as the key trading season is likely to disappoint many retailers in the footwear and apparel sector, despite attempts to ignite spending via newness and discounts, analyst figures show.
According to GlobalData, total retail sales are to increase by 1.9% in the fourth quarter this year which, despite being up on the 1.5% increase recorded last year, is driven entirely by inflation as volumes are forecast to remain flat, compared to the 1.3% growth in volumes experienced in the fourth quarter of last year.
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Non-food retailers will continue to struggle this Christmas with sales expected to show year-on-year growth of only 1.2% in the fourth quarter, says GlobalData. Volumes are forecast to fall by 0.1% as price rises, which came into play as result of the weakened pound, will discourage cash-strapped consumers from shopping over the seasonal period.
Meanwhile, weak sales early in the fourth quarter may entice more retailers to take part in Black Friday this year, although this runs the risk of bringing forward sales that would have otherwise been made at full price.
“After a poor Q3, clothing and footwear retailers will be hoping for some respite in Q4 and an opportunity to end the year on a more positive note,” says GlobalData. “However, Christmas will disappoint many in the sector with another quarter of declining volumes forecast, down 0.6% on Q4 2016, despite retailers’ attempts to ignite spending via newness and discounts.
“Retailers that have traded well throughout the year such as Primark, Asos, JD Sports, Zara, Very, Kurt Geiger and Selfridges will continue to prosper in Q4 given their compelling and differentiated propositions.
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By GlobalData“Meanwhile, we do not expect to see a reversal in fortunes among those that have suffered in 2017, with the likes of Debenhams, Next, Arcadia and New Look forecast to lose out.”
And while trading looks tough for traditional footwear and apparel retailers, the online channel will continue to outperform physical sales growth with online pureplays such as Asos and Amazon set to be the winners this Christmas, drawing consumers online with their vast product offer alongside market leading, fast and low-cost delivery propositions.
The increased availability of delivery saver schemes this year, such as Next Unlimited, Boohoo Premier and New Look’s delivery pass, alongside express delivery options being widely accessible, will encourage shoppers to leave online purchases later, having the confidence to purchase right up until the last few days before Christmas, says GlobalData.
“Newly introduced ‘try before you buy’ delayed payment options being offered by retailers such as Topshop, H&M and Asos will further entice shoppers online over the Christmas peak as budgets are constrained by the rising costs of essentials and consumers look for convenient ways to manage their spend.”
