Recent reports from Barclays and the British Retail Consortium-KPMG shed light on UK consumer behavior in December, revealing a notable shift in priorities with fashion not topping the list.
Barclays reported a 2.3% YoY growth in consumer card spending in December, falling below the latest inflation rate of 4.2%. Despite being a key festive spending month, specific retail sectors faced challenges. Entertainment (+12.3%) and travel (+14.1%) thrived as consumers looked ahead to experiences in 2024.
While optimism exists for the fashion and beauty sector as consumers plan for holidays, the Christmas season saw a decline. Spending on non-essential items increased by only 2.5%, driven by festive activities boosting the hospitality and leisure sector (up 8.9%).
In specific fashion spend, transaction volumes edged up by 0.2%, but actual spend dropped by 2%. JD Sports reported a weak festive season, witnessing a 9.7% drop in transactions and a 6.2% decrease in spending for sports & outdoor retailers.
The BRC-KPMG figures concurred, noting that December sales rose at retail, but this potentially masked a drop in volumes when accounting for inflation. For 2023, UK total retail sales increased by 3.6% from 2022, but non-food declined by 0.1% for the year.
Online non-food sales fell by 0.8% in December, showing a shallower decline compared to previous months. Paul Martin, UK Head of Retail at KPMG, commented on the lack of a festive feel-good factor, with Christmas shoppers favoring beauty, health, and personal care products over clothing and technology gifts.
As cautious consumers navigate economic challenges, retailers may face downward pressures on demand in the opening months of the year, potentially easing off by spring if economic conditions improve.
