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PEAK 2022 Christmas retail sales set to be down at least 3% as cost of living crisis bites

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UK retailers are poised for a more muted performance this festive season as retail spending is set to fall 3% on 2021 to £82.2bn during the six weeks leading up to Christmas. 

According to the VoucherCodes.co.uk Shopping for Christmas 2022 report, which is now in its 10th year, this will be the first decline in festive spending outside of the pandemic. Sales are expected to decrease by £2.51bn (3%) compared to Christmas 2021 (£84.7bn), falling below 2019’s pre-pandemic results (£83.1bn) as record inflation hits shopper wallets. 

However, sales are not expected to plummet to the levels seen during Christmas 2020, during the peak of the pandemic (£79.7bn).

The report blames the drop in spend on the increased financial pressure being felt by consumers as a result of the cost-of-living crisis. With inflation hitting a record 10.1% and prices of everyday essentials rising at the fastest rate in 40 years, almost half of Brits say they are worse off financially now than in the run up to Christmas 2021 (48.8%).  A fifth of the population also admit they are significantly worse off (19.7%) than before last Christmas. 

In unwelcome news for retailers who rely heavily on gifting during the golden quarter, sales of Christmas gifts are set to be hit the most of any category. The report forecasts a 6.8% decline in gift spend compared to 2021 (£11.59bn v £12.44bn), with consumer electronics bearing the brunt of this decline, as £2.27bn is forecast compared to £2.7bn in 2021. This is followed by clothing and footwear with a decline of -12.1% and jewellery at -11.1%. However, in better news for stockists of alcohol and confectionary, consumers are set to spend 6% more on these gifts this Christmas than in 2021 (£89m v £84m). 

Maureen McDonagh, Managing Director at VoucherCodes.co.uk comments: “Retail, like so many British industries, has had an incredibly tough year, and our report forecasting a year-on-year sales decline this Christmas period will undoubtedly come as concerning news for many retailers. 

“With families facing a difficult winter as the cost-of-living crisis continues to deepen, it comes as no surprise that consumers will be much more conscious than ever with Christmas spending. We anticipate customers will be looking to shop early to spread the cost of Christmas and make cutbacks where they can, particularly on gifting, as they prioritise spending on other areas this festive season.

“Now more than ever, brands need to offer proven value to customers. Initiatives such as offering discounts early in the Christmas shopping season to help out customers looking to spread the cost of Christmas, providing market-leading discounts on popular and essential products, and running extra value shopper incentives are just a few key ways retailers can build trust with their customers this Christmas. We expect that those brands who show their customers’ needs are front of mind will ultimately see the best performance this Christmas.”

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