UK high street warned not to expect return of pre-Covid Christmas | Retail industry
The number of people visiting UK shops this Christmas could remain almost a fifth below pre-pandemic levels as shoppers struggle with the cost of living crisis, according to forecasts.
Retail footfall in December is expected to be 18% lower than the same month in 2019, said Springboard, a retail data company.
The economy is already in recession, the Bank of England said on Thursday, adding that interest rates are likely to rise further to combat inflation, which is near a 40-year high. Households are braced for steep increases in energy bills on Sunday, even after an energy price freeze by the government that is expected to cost £60bn or more.
“There are just so many headwinds facing consumers at the moment,” said Richard Lim, the chief executive of the Retail Economics consultancy. “It’s inevitable that they’re going to cut back over Christmas and the wider festive period.”
Springboard’s data suggests footfall across all UK retail destinations has moved closer to pre-pandemic levels as the year has progressed. However, it said that trend would reverse through the autumn.
Diane Wehrle, the data company’s marketing and insights director, said the usual drop in spending between August and September would be deeper than usual “due to consumers’ fears over the impact of the rise in energy costs expected in October on their household budgets”.
Springboard predicted that December footfall on high streets and in shopping centres would be down by more than a fifth compared with 2019. That would be a much worse hit than to retail parks, where visitor numbers are predicted to be 6% lower than three years ago. Retail parks tend to be anchored by a large supermarket where consumers shop for essentials like food, and sales have rebounded from the pandemic more quickly.
Households could shift their spending patterns in the run-up to Christmas, Wehrle said. Springboard predicted a smaller than usual drop in footfall from October to November as shoppers bring forward Christmas purchases to the Black Friday discount window to stay ahead of inflationary price rises.
One key question for bricks-and-mortar shops over the coming months is whether the number of shoppers will return to a “normal”, pre-Covid level or whether the increased online sales during the pandemic will be permanent.
Lim said there was some evidence that footfall could be supported by increased delivery and returns fees from online retailers, and by shoppers not wanting to risk buying clothing in the wrong size online and being forced to wait for refunds. In-store discounts can also be much more generous than online, he added.
There could be opportunities for cheaper food retailers in particular, Lim said, although it would require “empathetic marketing”, given the pressures shoppers have been facing.
A move to cheaper supermarkets could further benefit the German supermarket chains Aldi and Lidl, which have rapidly gained UK market share in recent years. This month, Aldi overtook British “big four” stalwart Morrisons in terms of market share, according to the the grocery analysts Kantar.
A third of UK households are already trading down to cheaper products and making use of promotions, according to a survey published on Monday by the accountancy firm KPMG. A quarter said they were shopping at less expensive retailers.
Linda Ellett, the UK head of consumer markets, retail and leisure at KPMG, said: “It’s clear that consumers are responding where they can – altering how much they buy, what they buy and where they buy it.”
The chancellor, Kwasi Kwarteng, on Friday announced tax cuts worth £45bn, some of which are expected to cushion some of the blow of the crisis. However, retail industry insiders have doubts over whether the cuts will prop up sales, given that they are focused on higher earners who do not tend to spend extra income.
Helen Dickinson, the chief executive of the British Retail Consortium, a lobby group, said the mini-budget’s cancellation of a national insurance tax increase could “shore up consumer demand” going into what would be “a challenging winter for households and businesses alike”.