Fewer shoppers will head to the high streets in the run up to Christmas, as the cost-of-living crisis wipes out footfall gains made in 2022, a new forecast suggests. Shoppers will be looking for discounts, says Springboard’s Diane Wehrle – but others question whether retailers will be able to afford them.
Business intelligence specialist Springboard says in its forecast that footfall will decline month-on-month (MOM) in the run-up to Christmas, falling in September (-4.9% MOM), October (-2.5%) and November (-0.3%) as the crisis dents shoppers ability to buy – before rising once more in December (+6%). That December uplift will be felt across all types of destinations, including high streets (+4.5%), retail parks (+5%) and shopping centres (+10%). December footfall will also be 4.2% higher than the previous year, following on from year-on-year declines in October (-2.1%) and November (-2.7%).
But Springboard says the continued decline will eradicate many of the gains made in 2022 and as a result, December footfall will be 18% lower than in pre-pandemic December 2019 – the widest gap on the same comparison since February 2022 (-20.7%).
Diane Wehrle, insights director at Springboard, says: “We have been publishing footfall data since 2009 and in each year between 2009 and 2019 footfall dipped in September from August because of a drop in consumer demand following the end of the holiday season and the start of the school term. Covid heavily disrupted the two intervening years, but this year the drop in footfall will be more severe than in the same months pre-2019. This is due to consumers’ fears over the impact of the rise in energy costs expected in October on their household budgets.
“The second key factor – once again identified through past trends – is that footfall in November dips marginally, mainly due to a drop in high street footfall which tends to occur due to the lure of shopping centres for consumers over the Black Friday trading period. In contrast to the forecast for September, the drop in footfall in November this year will be mitigated by shoppers being likely to use the discounts available over the Black Friday period to buy Christmas presents with the hope of outrunning inflation.”
Rob Shaw, SVP global sales at Fluent Commerce, says: “Without a doubt, the cost of living crisis will affect overall household spending up to and over the Christmas period. Families continue to see steep rises in essentials like food and energy so, it’s fair to say people will be looking for ways to make their pot of money stretch further this year. That said, Christmas is a time when families come together and try to forget wider issues for (at least) a few days. I do believe that whilst there may be a reduction in luxury and non-essential product spending, families will continue to spend at similar levels of previous years, but searching harder to ensure value for money is achieved. We could also see a boom in fashion and clothing spending as people buy more winter wear to keep warm – reducing the reliance on gas and electricity.
“Christmas, like no other season, tends to bring shoppers out to high streets. Families will, I’m sure, continue to want to see Christmas lights and displays in many towns and cities, which will lead to busier stores. That said, I am confident most larger or important gift purchases will be made well in advance as the concerns of product availability will be paramount to avoid disappointment. So, we could well see an increased level in pre-order and online spend whilst stores are utilised for last minute additional purchases.” Shaw suggests that tactics from discounts to free samples and attractive displays will persuade shoppers into a more experience-led shopping experience.
Rising cost of Black Friday
Commenting on the Springboard forecast. Melissa Minkow, director of retail strategy at CI&T, says: “With winter on its way and energy bills set to rocket, consumers are tightening their belts – and this will inevitably impact retail footfall over the Christmas shopping period. People are wary of what is to come, so spending on non-essential items is now few and far between for many.
”For this reason, however, Black Friday will carry greater significance. Extreme inflationary pressures mean retailers are less able to offer discounts on high-demand goods over a sustained period, as they’ve done in previous years in the build-up to the retail event. This year, a one-time-only discount exclusive to the weekend will be a key strategy – appealing to consumers with tighter budgets, who are holding out for as long as they can to cross off Christmas shopping, and who are keen to take advantage of only the biggest discounts.”
Today’s forecast news comes soon after Fruugo managing director Tony Preedy warned that many retailers would not be able to afford to take part in Black Friday this year – despite suggestions that shoppers are holding out for Black Friday weekend in order to buy. Some 67% of shoppers are more interested in this year’s Black Friday than last because of the cost of living, according to LoyaltyLion research, while 68% are waiting for Black Friday weekend to buy certain items.
““While it’s understandable that consumers might want to delay their shopping until Black Friday weekend, most retailers will need to opt out this year. Recent years have seen a stand-off develop between consumers delaying their shopping until the end November, holding out for deals, and retailers that need to avoid concentrating all their trading into a very short time window. For most retailers, all of their annual profit could be made – or lost – in the six weeks running up to Christmas. While consumers may be motivated to hold off shopping, hoping they will be able to get a discount, retailers need consumers to shop early.
“Consumers are of course under huge financial pressures this year, but so are retailers. Business-level cost pressures are the highest they have been in decades, and discounts are hugely expensive to a retail profit and loss (P&L). Although consumers may want discounts, retailers are not in a sufficiently strong financial position to give them.
“The remedy for retailers wanting a more profitable holiday trading period is to reduce the number and size of discounts they offer. In some cases, this means boycotting Black Friday completely and communicating this in advance to customers, so they don’t hold out for discounts that aren’t going to happen. Retailers are likely to have to warn shoppers that, due to stock shortages, they will need to buy early this year to be sure of getting their hands on scarce products.
“To clear their inventory, retailers must increase the potential audience for their products. By marketing their products at full price via marketplaces – particularly ones that specialise in cross-border commerce – retailers can generate incremental sales at full margin, which avoids the need to sell those units at a discount in their domestic market. Although not great news for consumers, it may be the only way some retailers can survive the cost squeeze they are enduring.”