The findings in the ‘State of Spend: Retail Report’ draws on data from over 24m UK bank accounts.
The report scrutinises consumer behaviour within three principal sectors: retail, grocery, and household. It notes that consumer habits are in a state of flux, necessitating that brands adapt to keep pace with these changes.
The report said that brand loyalty and the pursuit of affordable luxuries appeared to be driving this steady performance within the fashion and beauty sector.
Cardlytics The State of Loyalty report, published last year, indicated 64% of UK shoppers placed a higher emphasis on affordability rather than brand loyalty in their purchasing decisions.
The study revealed that online fast fashion, after a stagnant period in 2024, saw a resurgence with a 13% increase in Q1 2025.
This rebound in online fast fashion is attributed to promotional discounts and a renewed interest in trend-driven purchases, indicating that consumers remain influenced by cost and newness, especially when brands can quickly satisfy these demands.
In the beauty sector, there was a 5% year-on-year increase in spending. The number of transactions grew faster than the total spend, suggesting that while consumers continue to treat themselves, they are doing so more frequently with smaller purchases.
This behaviour aligns with the 'lipstick effect,' where consumers opt for less expensive luxury goods during times of economic uncertainty, explained Cardlytics.
Conversely, department stores are facing an increasingly steep decline in relevance and sales. There was a 4% drop in spending in 2024 and an additional 5% decrease in early 2025, according to the report.
It noted the figures for department stores reflect the struggles faced by traditional one-size-fits-all retail models as consumers increasingly favour more specialised, brand-centric shopping experiences.
Cardlytics UK Partnerships SVP Lucy Whittemore said: “We’re seeing a more discerning consumer – still spending but doing so more selectively and looking for clear value, trusted brands and a sense of reward. Physical retail is regaining momentum for brands offering something distinctive, and in a more competitive, cautious environment, loyalty won’t be won by price alone. Targeted offers, personalised rewards and a clear brand proposition will be key.”
