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Consumer spending takes a hit as festive season approaches

25 October 2022

Retail sales fell in September and experts are warning that consumer spending could drop by as much as £4 billion in the run-up to Christmas compared to last year.

Delivery firm ParcelHero is warning that Christmas cheer will be in "short supply" this year for retailers as its research has found that British consumers are likely to spend £4bn less this Christmas than last.

Head of consumer research, David Jinks, said: "We are facing an Austerity Christmas as grim as any since World War II … No-one wants to sound like the Grinch, but there are many reasons why we're unlikely to have a merry Christmas this year. Most obviously, shoppers will have less money to spend in the face of significant energy and mortgage bills."

In addition, many retailers bought their Christmas stock when the pound plummeted after the mini budget in September so there's less wiggle room for Black Friday and Christmas discounts, said Jinks.

These findings are supported by a new report published by Ankorstore. It has found that:

  • 60% of Brits say they will be spending less in shops and online due to rising costs, inflation and a pending recession;
  • 67% of millennials say they will be spending less;
  • 41% of consumers plan to buy fewer Christmas gifts than last year;
  • 6% plan to buy no Christmas gifts at all.

Support for local businesses

On a positive note, however, 54% of British independent retailers are still expecting an uptick in profits and sales volumes as shoppers promise to support local independent retailers. The findings show that 83% of shoppers believe it is more important than ever to support their local high street and 69% of British independent retailers are optimistic that consumers will support them.

Retail expert Mary Portas said: "Independent retail has been through the ringer in recent years but most of us know we've got to do our bit to support it. Thriving retail helps us all. Busy local high streets provide community and connection. Online retail provides employment, inspiration - and a whole heap of products that you don't get in brands with a thousand stores. Let's spend our money wisely this Christmas."

Online shopping has become more popular since the pandemic. Esendex has surveyed 4,000 shoppers in the UK, United States, Australia, France, Germany, Italy and Spain to discover what the retail landscape looks like in 2022. It has found that 29% of Brits now make more than 80% of their purchases online, compared to 11% pre-pandemic.

The latest figures from the Office of National Statistics (ONS) show that online retail sales have settled at 26.4% of the market, after peaking at 37% in February 2021 during COVID lockdowns.

ParcelHero's David Jinks said: "As retail settles to a new equilibrium, it will be those retailers with strong in-store and online sales that will ultimately triumph in a post-COVID world … unless retailers develop an omnichannel approach, embracing both online and physical store sales, the High Street as we know it will reach a dead-end by 2030."

Another key factor affecting businesses is that loyalty to brands has wavered during the cost of living crisis. A recent survey of 1,000 consumers by Ello Group has found that 30% say rising costs are impacting their trust in brands and 22% say that loyalty to the businesses they normally buy from has declined in recent months.

As well as rising costs, 32% of consumers say good customer service is one of the leading factors influencing their trust in brands. One in ten customers also said that the sustainability credentials of a brand is a key factor in their purchasing decision.

Written by Rachel Miller.