Christmas presents a challenge for retailers as sales and foot traffic decline dramatically
Retailers will have a difficult Christmas as the start of the “golden quarter” sees a steep decline in high street sales and foot traffic. Sales in October started off well, but they then declined in the final week of the month.
In its sluggish climb back to pre-pandemic levels, foot traffic also experienced a setback. Retailers will have a challenging Christmas as a result of the dramatic decline in shoppers and sales last month, which coincided with the beginning of an increase in energy prices.
According to the most recent high street sales tracker from consultancy firm BDO, sales in October began off brightly but gradually declined and fell in the month’s final week.
If we exclude the first week of the month, retail sales increased by only 1.8% rather than the 3.5% like-for-like increase seen across all stores and online.
According to Sophie Michael, head of retail at BDO, “with the present level of inflation, this suggests that actual sales volumes have declined dramatically.”
As the cost of living problem strikes, retail sales continue to decline. In-store sales increased by 6% from October of last year, although that is the weakest growth since non-essential stores reopened in February 2021 after the lockdown ended.
Lifestyle sales, which comprise general household products, presents, health & beauty, and leisure goods, decreased by 0.1% as a result of budget constraints brought on by the cost of living problem.
The first unfavorable result for the category since February 2021, according to BDO, “indicates that the slump in consumer discretionary spending has spread to include the lifestyle sector, having already seen homewares record declines in previous months.”
With a 6.7% increase, fashion sales performed better than any other category, although it is the third month in a row that growth has slowed.
Michael referred to the most recent numbers as a “disappointing start” to the so-called “golden quarter,” which includes Christmas and Black Friday and is thus regarded as a crucial time for retailers.
Retailers would have expected performance to improve as we reached the Golden Quarter after a summer of slow retail sales growth, she continued.
But despite this, like-for-like sales are still on the decline and consumer confidence is still quite low.
The UK has failed to reach pre-pandemic levels of foot traffic. Separate statistics reveal that the decline in sales is paralleled by a decrease in the number of customers entering stores across the UK.
In October, foot traffic increased by 2% over the same month the previous year as the city continued to recover from the pandemic.
However, according to data from the British Retail Consortium, it represents a substantial drop from the 8% gain in September.
It is still 12% below October 2019, which was the beginning of the pandemic. “Footfall took a hiccup in its steady comeback to pre-pandemic levels as rising costs and tighter budgets meant many fewer people made journeys to the shops,” BRC Chief Executive Helen Dickinson said.
After the price cap increased by 26% in October, many households experienced their first full month of higher energy costs, which decreased household discretionary spending.
Foot traffic in most cities decreased as a result of rail strikes, which could be made worse by additional strike action.
The depressing statistics came as the Bank of England yesterday cautioned that after raising rates once more to combat inflation, the UK would experience its deepest recession in a century.
The Bank stated that the future for the UK economy was “extremely challenging” and predicted a downturn that would persist until the middle of 2024.