According to recent reports from Barclays and the BRC-KPMG, retail and consumer spending in the UK during January was sluggish, with fashion sales taking a backseat even with clearance sales abound. While the two reports have different criteria (Barclays focuses on consumer spending through payment cards, while the BRC considers retail sales through all methods), they ultimately convey the same message: times are tough and shoppers are being cautious.
Barclays noted that consumer card spending in January saw a slight increase from December, but it still fell below the inflation rate. The bank attributes this to consumers opting to stay at home and save money after the busy holiday season, as well as to avoid the cold weather exacerbated by storms Isha and Jocelyn. Further findings from Barclays’ survey showed that Britons anticipate spending slightly more on Valentine’s Day this year compared to last year, but this increase is likely due to higher prices rather than a sudden desire to splurge.
Examining the numbers, consumer card spending in January grew by 3.1% compared to the previous year. However, this growth rate is lower than the latest CPIH inflation rate of 4.2% and December’s growth rate of 2.3%. Spending on essential items saw an increase of 4.2%, but spending on non-essential items only grew by 2.6%, aligning with growth rates seen in December and November of the previous year. As household bills rise, 43% of consumers plan to reduce discretionary spending, as many tighten their belts after the festive season.
Inclement weather negatively impacted consumer footfall in stores in late December and January, leading more shoppers to opt for online browsing during post-Christmas sales. On Boxing Day, face-to-face retail spending decreased by 10.9% compared to the previous year, likely due to the cold weather and storms. However, this decline was offset by a 10.7% increase in online retail spending. In January overall, online shopping accounted for 57.6% of all retail shopping (excluding groceries), marking the highest share of online spending in this category since February 2022. While clothing stores experienced a 0.6% decline in sales, this was a slight improvement compared to the 2% drop in December.
The BRC-KPMG Retail Sales Monitor offers a different perspective, stating that total retail sales in the UK only increased by 1.2% year-on-year in January. The report offers a less positive picture for online shopping, as total non-food sales decreased by 1.8%, with in-store non-food sales seeing a slightly smaller decline of 1.5%. However, online non-food sales experienced a significant decline of 4.2%.
Helen Dickinson, CEO of the BRC, attributes the slow growth in retail sales to easing inflation and weak consumer demand. While the January sales initially boosted spending in the first two weeks, this momentum did not continue throughout the month. The milder temperatures affected clothing sales, especially for winter clothing and footwear. However, health and beauty products continued to perform well.
Linda Ellett, UK Head of Consumer Markets, Leisure & Retail at KPMG, acknowledges that low consumer confidence from the previous year still lingers. Health and beauty products have driven sales both online and on the high street, while sales for sports and travel equipment have received a boost from sun-seekers and consumers with healthy resolutions, increasing by over 4% compared to the previous year.
In conclusion, the reports from Barclays and the BRC-KPMG indicate that UK spending in January was weak, with fashion sales declining despite clearance sales. Low consumer confidence, rising household bills, and inclement weather have contributed to cautious spending habits. However, health and beauty products have continued to perform strongly in the retail sector. Retailers will need to adapt their strategies to navigate these challenging market conditions and cater to the changing preferences and priorities of British consumers.