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Retailers Face Challenging Christmas Season

The last couple of months of the year are traditionally the busiest and most profitable for retailers. However, this year, UK retailers are facing some of the most challenging conditions since the financial crisis of 2008/9, after the two previous difficult years caused by the pandemic.

The Guardian reports that the cost-of-living crisis has already seen consumers cut back on spending in an effort to ease the pressure on household budgets. Inflation has soared this year to 10.1%, well above the Bank of England’s target of 2%, and food and energy prices rose sharply.

A survey by Barclaycard found that half of all consumers in the UK were planning to cut back on non-essential spending this season, such as eating out, presents, and extra food and drink.

Esme Harwood, a director at Barclaycard, told the publication: “Rising petrol and supermarket costs continue to bite but Brits are spending less on energy bills as government support kicks in and people find ways to economise at home.”

She added: “Consumers continue to swap big nights out for cosy evenings in as they reduce their discretionary spending, while health and beauty, and home improvements enjoy a little boost.”

“With the festive season around the corner, we’re likely to see further cutbacks, as Brits rein in their Christmas spending. Consumers are adopting a restrained approach to festivities, reaching for pre-loved gifts and setting spending limits to manage their costs during this traditionally expensive time of year.”

One of the biggest UK retailers, Marks and Spencer, has revealed that its profits have fallen by almost a quarter in the first half of the year. The BBC reports that the retail giant’s profits are down by 24%, partly due to rising energy costs, rising wages, and higher raw material prices.

The retailer also commented that consumers are spending less, although M&S do have a relatively affluent older customer base. They have also recently announced plans to close several of the worst-performing high street stores, and focus a smaller food -based outlets, and will be further affected by the closure of their Russian stores.

Helen Dickinson, the BRC’s chief executive, said: “Christmas will come later than last year for many and may be more gloom than glitter as families focus on making ends meet, particularly as mortgage payments rise.”

She added: “Retailers face an additional government-imposed £800m inflationary increase in their business rates bills next year so the government should freeze rates and reform the broken transitional relief system to alleviate cost pressures that are feeding through to higher prices at a time when people are least able to afford them.”

Another trend which market analysts have identified is that consumers are starting their Christmas shopping earlier, to spread the cost over several pay days, rather than dipping into savings or overdrafts to pay for Christmas all in one month. Brands such as John Lewis are toning down their advertising, to be more in tune with the downbeat economic news.

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