With the holiday season fast approaching, the anticipation of festive cheer, gift shopping, and winter fashion is in the air. However, the reality may not be as promising as expected.
The latest data from IMRG paints a less cheerful picture for the gifting industry, showing a year-to-date decline of 12.5% in online gift sales for 2023. IMRG’s outlook for the Golden Quarter suggests limited improvement in this trend.
The fashion sector, too, faces ongoing challenges as it strives to recover from a year marked by unfavorable weather patterns during crucial seasons.
Let’s delve into the data and insights with IMRG’s Strategy and Insight Director, Andy Mulcahy, to understand the gravity of the situation.
September Reversal
IMRG’s Online Retail Index monitors the online sales performance of over 200 UK retailers. While August showed the first positive year-on-year (YoY) growth in total online revenue in 29 months, at +1.3%, September saw a return to negative territory, recording a -3.1% YoY decline.
Online gifting retailers are among those hit the hardest. Their category experienced a significant 14.1% drop in revenue in September, worsening the already weak year-to-date performance. This decline is unexpected at a time when gift shopping typically surges in anticipation of Christmas.
At the start of the year, IMRG had projected a 7% decline for the gifting category. However, the outlook has grown bleaker, with an 11% sales drop expected over the crucial Black Friday week.
Nevertheless, the report notes that multichannel gifting retailers and those offering diverse products are showing more positive results. Online gifts purchased through multichannel retailers rose by 5.5% last month, while online-only retailers recorded their steepest decline of the year at 26.7%. Traffic for specialist gifting retailers has fallen by 17.1% year-to-date, whereas those selling a variety of products, including gifts, have seen a 4.3% increase.
With only ten weeks until Christmas Day, this is a challenging position for the gifting sector. IMRG acknowledges that the gifts category has faced significant challenges since the initial surge during the lockdowns in 2020, and the overall outlook remains less than optimistic.
Turning to the fashion sector, it, too, faces difficulties. Year-to-date, it’s down by 6%, a significant contrast to the earlier forecasts of 0% growth for the year. Online fashion sales dipped as much as 9.1% in September.
The online fashion segment has experienced a challenging year, largely due to unpredictable weather patterns. Andy Mulcahy mentioned that «the weather has just not played ball at all (warm winter, dry spring, wet summer, 30 degrees in September, etc).»
Retailers may find themselves overstocked as they approach Black Friday. A more than 9% drop in fashion sales last month was followed by a 14.9% decline in the first week of October, partly due to sunny weather delaying purchases of knitwear, coats, and boots.
Mulcahy also attributes the rise of resale platforms like Vinted and Depop to the fashion industry’s challenges. «I wouldn’t discount the significance of Vinted, Depop, etc.,» he commented. «They are posting big numbers, and the second-hand market appears to be thriving on these apps.»
Strength in Health & Beauty
On a brighter note, the health and beauty category has shown resilience. September witnessed a 1.6% growth, and year-to-date figures indicate a 1% increase, defying earlier forecasts of a 4% decline in 2023. Mulcahy suggested that retailers in this space view it as somewhat recession-proof, as it offers relatively inexpensive, mood-boosting products.
Returning to the fashion segment, consumers may be in for a season of discounts and bargains. Mulcahy believes the sector’s challenges may manifest in the breadth and depth of discounts offered during November and Black Friday.
This could lead to some less than desirable financial results for many companies.
For gifting retailers, especially online-only specialists, the economic context has restrained demand, and the outlook suggests a challenging Christmas trading season for some.
