The Golden Quarter, which is typically a strong period for retail sales in the UK, has been disappointing this year due to the discount-focused behavior of British consumers. This trend has been confirmed by recent reports, such as the monthly Barclays study on consumer spending and the British Retail Consortium-KPMG report on retail spending. According to Barclays, card spending grew by only 2.9% year on year in November, which is lower than the latest inflation rate of 4.7%. This figure, although slightly higher than the 2.6% growth in October, was expected to be higher due to the Black Friday sales.

Despite the overall lackluster performance, there were some positive growth areas. Clothing stores saw a 2.8% rise in spending, while department stores experienced a 5% increase. Overall spending on non-essential items grew by 2.7% in November compared to 2% in October. This growth was attributed to the early start of Black Friday sales and the arrival of cold weather. However, the extended sales period dampened the impact of Black Friday itself, with transaction volumes down 0.6% compared to 2022. Surprisingly, Black Friday was not the busiest shopping day in November, as Super Sunday (November 26) saw a 13.5% increase in transactions compared to Black Friday.

The BRC-KPMG report also indicated sluggish sales growth. UK total retail sales increased by only 2.7% in November, compared to a growth of 4.2% in November 2022. Non-food sales fell by 1.6% over the three months leading up to November, and in-store non-food sales declined by 0.8% in the quarter. Online non-food sales dropped by 2.1% in November, highlighting a decrease from the previous year.

There are multiple factors contributing to this decline in sales. Rising costs have led to 59% of consumers actively seeking out deals and discounts, with 56% utilizing loyalty programs and 40% regularly searching for discount codes online. Helen Dickinson OBE, Chief Executive of the British Retail Consortium, believes that Black Friday’s earlier start initially had a positive effect, but the momentum did not continue throughout November as many households held back on Christmas spending. Paul Martin, UK Head of Retail at KPMG, suggests that consumers are opting for budget-friendly gifts, as evidenced by the decline in sales of jewelry and watches.

Martin has expressed concern about the weak sales growth during the key shopping quarter, with two out of three months seeing growth below 3%. He predicts that excess stock remaining after Christmas could lead to significant January sales and further impact already tight margins. As we move into 2024, the challenges are expected to persist, potentially resulting in more casualties in the retail sector, particularly for pure online players who have been experiencing consecutive sales declines for over 28 months.

Sources:
1. Barclays study on consumer spending: Barclays Study
2. British Retail Consortium-KPMG report: BRC-KPMG Report