UK: Retail & Leisure
Do Christmas trading results herald a happy New Year for retail?
Now that the dust has settled on the annual retail extravaganza that is Christmas, it is important to take stock. Which retailers won and lost? Which retail locations outperformed and how does the retail landscape look going into 2018?
Against a backdrop of economic uncertainty, lukewarm wage growth and levels of inflation that haven’t been witnessed for several years, Christmas 2017 provided retailers with a perhaps unwelcome challenge. However, despite the negativity, UK retail sales in December were buoyant compared to 2016, with spending up by 4% according Barclaycard – it’s not all doom and gloom on the high street!
While not all retailers have reported sales for the festive period yet, a few themes have become pretty clear, perhaps most importantly the outperformance of specialist, aspirational and discount retailers. Outstanding growth from retailers such as Joules, B&M, Superdry, Ted Baker, Mountain Warehouse, Quiz and Oxfam has shown that this outperformance has not been restricted to particular sectors. Once again, the common denominator for the majority of Christmas winners were fantastic product and supreme multichannel platforms. The latter, including click and collect, which continued to grow strongly for retailers such as Next and John Lewis, proved itself to being an indispensable element of modern retailing.
As has been the case for the past couple of years, Aldi and Lidl won the grocery war for the Christmas period, with both growing sales by 16.8% in the three months leading up to Christmas, according to Kantar. With the sector now worth £1bn in the weeks leading up to Christmas, it has become a focal period that can define the following year. As a result Aldi has subsequently announced expansion plans that will see them challenging for a spot in the ‘Big Four’.
The success of Black Friday once again exceeded expectations, with £3.1bn spent over the weekend. The stampedes triggered by minor discounts on substandard electrical goods are fortunately a thing of the past – instead, the event’s online credentials were furthered in 2017. John Lewis reported its busiest ever hour of online trading, whilst Argos recorded over 2 million visits in the first four hours of its sale.
With this in mind, consumers, landlords and retailers would be forgiven for thinking that the seemingly relentless growth of online would continue, rampantly, throughout Christmas. However, the opposite was found to be true according to recent research from GlobalData. In the 11 weeks leading up to Christmas, offline retail grew its share of consumers at the expense of online. Supermarkets saw the strongest growth, with the share of consumers visiting in each week increasing from 36.6% to 69.9%, while the High Street saw strong growth. If Black Friday is about sitting at home spending money on a phone or tablet, Christmas is certainly about shopping physically!
So what’s in store for 2018? The outlook for the sector is shrouded in uncertainty both at macro and micro level. Brexit will continue to impact consumer confidence, with the sense of limbo extant. While the occupational market has remained fairly robust in the top towns and cities across the UK, some worrying wobbles from several retailers have also reminded the sector of the mass closures and administrations following 2008. On the plus side, the UK consumer’s propensity to spend has not been as affected as previously forecast, albeit replacing spend on ‘things’ with experiences. Providing we keep spending into the New Year, for the retailers who get it right, 2018 will provide the opportunity if not to surge ahead then at least to keep pace.