High streets and shopping centres across the UK experienced a “drab December,” as footfall declined for the second consecutive year, raising concerns about disappointing sales in what is traditionally the most crucial month for retailers. This decline has left many questioning the future of UK retail as we enter 2024.
According to data from the British Retail Consortium (BRC) and analysts at Sensormatic, attendance at UK shopping centres, retail parks, and high streets fell by 2.2% in December compared to the same period in 2023. This decline was primarily driven by a 3.3% drop in shopping centre footfall.
“A drab December, which saw fewer shoppers in all locations, capped a disappointing year for UK retail footfall. This means 2024 is the second year in a row where footfall has been in decline. Even the golden quarter, typically the peak of shopping activity, provided little relief, with footfall down over the period,” said the BRC’s chief executive.
How Did Weather and Changing Consumer Habits Affect Retail Footfall?
The unseasonably bad weather further dampened in-store shopping. Storm Darragh, along with other climatic events, kept many shoppers indoors, especially in south-west England, Northern Ireland, and parts of Scotland, Wales, and northern England. The stormy conditions during November and December, combined with the wet autumn, led some to prioritise other activities, such as holidays, over retail spending.
“The weather certainly had an impact, with significant climatic events that kept people at home. These factors are likely to have contributed to lower footfall during the busiest shopping period of the year,” the BRC added.
This decline in footfall isn’t necessarily a reflection of lower spending, however. The rise in online shopping continues to make footfall a less reliable indicator of sales. Data from Visa confirmed that while physical stores saw fewer visitors, online spending surged. There was a 2.3% year-on-year increase in overall spending during the seven weeks leading up to Christmas Eve, driven by a 6.1% jump in online sales.
Which Retailers Benefited and Which Struggled During the Christmas Period?
Despite the struggles for many brick-and-mortar retailers, some brands appear to have performed better during the festive season. Notably, clothing and homewares chain Next is expected to have gained market share, and supermarket giants like Sainsbury’s, Tesco, and Marks & Spencer are also likely to report strong results.
However, the picture is less rosy for some sectors. Clothing and footwear specialists such as Quiz and Shoe Zone both issued profit warnings before Christmas, indicating that their sales were weaker than expected.
“Despite a difficult market, certain retailers are showing resilience and gaining market share. But we expect a mixed performance across the UK retail sector, with inevitable winners and losers,” said a retail expert.
Why Are Food Retailers Facing Struggles This Holiday Season?
The food retail sector also faced its own set of challenges. Businesses like Morrisons and Asda struggled with operational issues and faced fierce competition from discounting, which saw festive vegetables priced as low as 8p a bag.
Lidl, the UK arm of the discount supermarket chain, was the first to reveal festive trading figures, posting a 7% rise in sales for the four weeks leading to Christmas Eve. However, an analyst cautioned that this growth was partly driven by the company adding 3% more retail space. This expansion, it was argued, meant that underlying growth was likely lower than the reported figure.
“Lidl’s sales were boosted by the additional retail space. Their underlying growth is likely to have been less than 4%, which is in line with the current food inflation of around 2% in the UK,” the analyst added.
How Is Online Shopping Continuing to Dominate Over Physical Retail?
The shift in consumer habits towards online shopping remains a key trend. As footfall declined, e-commerce experienced significant growth. According to Visa’s data, electronics and homeware items were particularly popular, with sales in department stores rising by almost 7%, while electronics saw a modest increase of 1.3%. Meanwhile, clothing sales experienced a decline.
Despite the slowdown in footfall at physical stores, online spending continues to thrive, underlining the importance of e-commerce for many retailers.
“The increase in online sales highlights the ongoing shift in consumer behaviour,” the BRC explained. “Many shoppers are prioritising convenience and avoiding the weather-related challenges by shopping online.”
Did the Hospitality Sector Perform Better Than Retail?
While retail struggled, the hospitality sector experienced some positive momentum. Sales were up 2.7% in the week from 16 December, compared to the same week in 2023, according to the hospitality business tracker from CGA and RSM. Bars performed particularly well due to the timing of bank holidays and the resurgence of Christmas parties. However, pubs saw more modest growth of just 0.7%, which lagged behind inflation.
What Does 2024 Hold for UK Retailers?
As we move into 2024, retailers remain cautious, with concerns about the broader economy shaping the outlook. It was noted that despite some bright spots, the wider economic environment is likely to pose challenges.
“Despite rising real UK living standards, the British shopper appears cautious,” said an analyst. “The weakening macroeconomic backdrop, combined with high inflation and interest rates, is shaping consumer sentiment. The recent budget also seemed to take a lot of air out of the economy’s lungs.”
Retail experts expect the state of the labour market, interest rates, and inflation to continue to influence the UK retail landscape in the coming year. While the holiday season brought some wins for certain sectors, the overall picture for UK retail remains one of uncertainty.
“2024 will be another challenging year for UK retail retailers, as they navigate the continued decline in footfall, evolving consumer habits, and a fragile economy,” concluded the retail expert. “But retailers who adapt to these shifts will continue to find opportunities for growth.”
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