Dreary December retail sales deliver disappointment

Lower margins and squeezed prices revealed a disappointing end to the Golden Quarter in the December Retail Sales figures from the Office for National Statistics (ONS), as it appeared consumers bought their spending forward to November 2017 with events such as Black Friday.

Key findings from the statistics included the weakest quarterly growth since Quarter 1 (Jan to Mar) 2017, quantity bought decreased by 1.5% when compared with strong sales in November 2017 and that shopping for Christmas has shifted in recent years from being mainly in December to more in November as consumers seem to be starting their purchasing earlier in line with Black Friday promotions.

Wilkins Kennedy partner and head of retail and wholesale Phil Mullis commented: “December’s Retail Sales revealed a disappointing end to the Golden Quarter 2017 with a fall in purchase quantity of 1.5% compared to November 2017. Yes, there was small growth at 0.4% in the last three months compared to the previous three months but the overall trend is downwards.

“We continue to see inflation outstrip wage growth and while this remains it will be difficult for the retail sector to grow.

“Retail health indicators are based on demand, margin and cost. A fall in consumer demand coupled with rising input costs will force retailers to squeeze their profit margins. However, a discount-led purchase model to drive demand is not sustainable, as we have seen recently from the likes of Debenhams and Jaeger before them.

“Pureplay retailers and online purchasing seem to continue to do well, but retailers will need to think about where they fit into the 2018 marketplace in order to remain competitive.”

Fujitsu UK and Ireland commercial sector managing director Rupal Karia also commented on the ONS figures. “It is fair to say that retailers have a tough market to navigate,” he said. “High-street figures are at their worst in five years, and it’s clear consumers are wary of spending their money as inflation exceeds UK average wage growth, causing prices to increase and purse strings to tighten. Consumer spending habits aren’t what they once were and retailers cannot rely on what worked before or their heritage to get shoppers through the door anymore and part with their money.

“It isn’t all bad though, and we did see some success from retailers over the Christmas period. Interestingly, the retailers that did well had a strong multichannel offering as their differentiator for success. We have found that consumers want and will shop with brands that offer a better technology experience in store. What’s more, three quarters go as far as saying that if Amazon had a physical store, it would become their preferred place to shop.”

He continued: “This year is likely to be a tough one for retailers, with consumers uncertain about the future thanks to a turbulent economy. But with the right innovations, it could help foster a year of success and growth. Retailers should look at how they can adapt their offerings for customers, from collaborating with other retailers that complement each other and open them up, to a new flurry of customers and footfall; investing in their mobile operations to ensure they are facilitating a journey which for consumers starts on their phones; and thinking about how to truly create personal connections with their customers which make them return to time after time.

“It is a battlefield out there to win over consumers’ hearts and loyalty, and retailers need to ensure that they are customer centric, providing them with the services and channels they want, if they are to cut through what is a very noisy market.”