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High Street retailers have the worst Christmas for a decade as shoppers move online

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High Street retail sales had their worst Christmas trading period since the beginning of the crash in 2008, with December retail sales decreasing by 0.7% on a like-for-like basis from December 2017, when they had increased 0.6% from the preceding year.

According to the latest figures from the British Retail Consortium (BRC), Over the three months to December, In-store sales of Non-Food items declined 2.8% on a Total basis and 3.9% on a Like-for-like basis. This is below the 12-month Total average decline of 2.5%. The decline of the month was the worst since April in both Total and like-for-like terms.

On the flip-side, online sales of Non-Food products grew 5.8% in December, against a growth of 7.6% in December 2017. This is above the three-month average of 5.5% but below the 12-month average of 6.9%.  Online penetration rate increased from 29.1% in December 2017 to 31.2% last month.

“Squeezed consumers chose not to splash out this Christmas with retail sales growth stalling for the first time in 28 months,” says Helen Dickinson OBE, Chief Executive, British Retail Consortium. “The worst December sales performance in ten years means a challenging start to 2019 for retailers, with Business Rates set to rise once again this year, and the threat of a No-Deal Brexit looming ever larger.”

She continues: “The retail landscape is changing dramatically in the UK, while the trading environment remains tough. Retailers are facing up this challenge but are having to wrestle with mounting costs from a succession of government policies – from the Apprenticeship Levy, to higher wage costs, to rising business rates.

She concludes: “Retail makes up 5% of the economy, yet pays 10% of all business taxes and 25% of all business rates. This is neither fair nor sustainable. The Government should urgently look into reforming the broken business rates system and champion the future of retail in the UK.”

David Marshall, Professor of Marketing and Consumer Behaviour at University of Edinburgh Business School agrees: “Shoppers are cutting back on spending as the cost of living rises and uncertainty looms over what will happen post Brexit. As food prices continue to rise, shoppers are increasingly savvy when it comes to prices and looking for good value. In response, discount supermarkets continue to grow their market share and the shift in emphasis towards price competitiveness is likely to continue across the grocery sector.”

But there are other factors at work stresses Marshall. “In addition, seasonal buying patterns have changed,” he adds. “Black Friday, Cyber Monday and a surfeit of pre-Christmas discounting in stores has impacted consumer buying patterns and company margins in a traditionally strong trading period. Consumers have shifted some of their seasonal buying forward to take advantage of the promotional offers. Pre-Christmas sales are bad for retail margins but they are good, in the short term, for consumers. In the longer term the impact will be seen on the high street.”

Marshall adds: “These results show no abatement in the crisis of the High Street. Footfall is down and year-on-year sales flat. In store experiences and price incentives do not appear to have attracted customers back into stores. Online retail now accounts for one fifth of retail sales and is likely to continue to increase as a proportion.”

Paul Martin, UK Head of Retail, KPMG, says:  “Retailers experienced little festive cheer this year, with total sales in December delivering zero growth on last year. This comes despite some retailers desperately attempting to generate sales through slashed pricing, which has seemingly not been enough to encourage shoppers. 

“Growth in food did provide a glimmer of hope, being among the few categories to notice an uptick. However, the continued contrast in performance between the high street and online remained evident in December – albeit 2018 did also see a continued slowdown in online retail sales.”

“The first months of 2019 will unlikely hold much improvement. As many retailers report their festive trading performance, the list of winners and losers will become clear, but winning means more than just improving sales. Retailers have to protect their margins in order to deliver a profitable festive season.”

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