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Published on January 20th, 2017 | by The GC Team

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December retail sales ahead of last year but month-on-month sales disappoint

Retailers saw a strong end to 2016 with sales in the final quarter up 5.6% on the same period last year, but December’s month-on-month performance sounded alarm bells in certain quarters, with some believing the slowdown to be a sign that rising prices are starting to dent consumer spending.

According to the Office for National Statistics, estimates of the quantity of goods bought during December increased by 4.3% compared with the same month in 2015 but fell by 1.9% on November 2016 as Black Friday sales disrupted the pattern of consumer spending.

The largest contribution to the month-on-month fall came from non-food stores.

While some commentators blamed inflation for the drop in December’s figures, Heather Barson, Director for Retail and Hospitality for Fujitsu UK and Ireland, said they demonstrate a clear shift in consumers’ shopping behaviour and, to a degree, solidify November as the prime Christmas shopping period.

Patrick Munden, Head of Retail and Marketing at ecommerce specialist Salmon, added: “2016 was the year that Black Friday grew into a phenomenon, displacing the more common Christmas peak that retailers usually see.

“Black Friday,” he said, is “taking over the mantle as the most important retailing event of the year as UK shoppers grab most of their bargains in November, and not December.”

However, the KPMG/Ipsos Retail Think Tank, in its latest retail health index, said any benefit in the rise in seasonal demand over Black Friday and in the run up to Christmas was largely cancelled out by squeezed margins and rising costs.

Nonetheless, the ONS said that the underlying trend in retail sales remains one of growth, with the 3-month on 3-month movement in the quantity bought increasing by 1.2%.

Kate Davies, ONS Senior Statistician, pointed out that there were some notably strong figures from smaller retailers, in particular butchers, who reported a significant boost in sales in the run up to Christmas. But other small stores benefited too. Small businesses showed an estimated increase of 17.4% in comparison to December 2015.

Average store prices rose 0.9% on the year, and for all retailing, excluding fuel, an increase of 0.1% was recorded – the first rise since June 2014.

Online sales grew year on year by 21.3%, but fell on the month by 5.3% which, according to Salmon, falls in line with data showing that Christmas peak is enduring a gradual fall.

“Retailers saw 28% more online orders across the Black Friday period (22nd – 28th November) than the peak festive period (21st – 27th December),” said Munden.

The amount spent online accounted for 15.1% of all retail spending, excluding automotive fuel, compared with 13.1% in December 2015, with the average weekly spend up 21.3% to £1 billion.

“Generally, it was a strong end to the year for vendors that embraced ecommerce and strengthened their multichannel offering. Consumers are now taking to online services in search of a convenient, quick and easy-to-use service,” commented Munden.

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