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UK consumer demand returns to form ahead of Christmas

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Shoppers at Regent Street, London
Demand looks promising for retailers in the run-up to Christmas. Photo: Simon Dawson/Reuters

Customer demand on UK high streets accelerated compared with the previous month in October, as retailers prepare for the all-important run up to Christmas.  

According to the British Retail Consortium (BRC)-KPMG retail sales monitor, as social calendars started filling up with festivities, clothing and footwear sales performed well. Meanwhile, furniture and electrical sales were held back by global logistical issues and microchip shortages.

With Halloween heavily curtailed by the pandemic last year, chocolates and children’s costumes were in high demand as families made the most of the occasion.

Some people started their Christmas shopping early with beauty advent calendars flying off the shelves and searches for Christmas items ramping up online.

The monitor found that on a total basis, sales increased by 1.3% in October, against a growth of 4.9% in October 2020. This is below the three-month average growth of 1.7% and the 12-month average growth of 10.2%.

On a two-year basis, total retail sales grew 6.3% during October compared with the same month in 2019.

Read more: European stocks mixed ahead of another big week of data releases

UK retail sales decreased 0.2% on a like-for-like basis from October 2020, when they had increased 5.2%. This was below both the three-month average growth of 0.3% and the 12-month average growth of 10.6%.

Over the three months to October, Food sales increased 1.5% on a total basis and 0.3% on a like-for-like basis. This is below the 12-month total average growth of 4.7%. For the month of October, food was in growth year-on-year.

"Retailers are doing everything they can to offer customers the choice and availability required throughout the industry’s busiest period, prioritising the food and other festive products needed to celebrate," said Helen Dickinson, CEO of the BRC.

"Retailers are hopeful that demand will continue right through the golden quarter, however, there are challenges ahead with higher prices on the horizon compounded by the many increasing costs faced by consumers such as higher energy bills and rising national insurance.”

Online non-food sales decreased by 8.0% in October, against a growth of 39.0% in October 2020. This is below the three-month average decline of 6.1%.

The non-food online penetration rate decreased to 42.0% in October from 48.8% in October 2020. While down on last year, it was up 10.4 percentage points on the 31.6% seen at the same point in 2019.

While October data signalled positive news for the high street, week-on-week data from high street monitor springboard showed a decline in footfall in the last week, partially due to the end of the school half-term holiday.

Footfall across UK retail destinations declined last week from the week before by -9.3%, with the greatest drops in high streets -10.9% and shopping centres -11.6%, versus a drop of -3.1% in retail parks.

The decline in footfall averaged -11.7% between Monday and Friday compared with -3.1% over the first and last days of the week (Sunday and Saturday), reflecting the greater gains in footfall made in the week before last during the working week which averaged +15.5%, versus +1.9% on Sunday and Saturday.

Read more: UK leads the way in retail footfall recovery among EU peers

"It is important to appreciate that this was an expected result," said Diane Wehrle, Insights Director at Springboard, noting that footfall has dropped in the week post the October half term break in every year since Springboard starting publishing footfall benchmarks in 2009.

Watch: What is inflation and why is it important?

Paul Martin, UK Head of Retail | KPMG

“October provided a modest boost for the high street as total retail sales grew by 1.3% compared to last year.

“Clothing and health and beauty sales continued to dominate at the tills whilst demand for home-related purchases declined further and grocers had another poor month with food and drink sales muted at 0.27%

“Confident consumers are heading to physical stores to make purchases, as online sales fell yet again in October, although with penetration rates at 42% online shopping remains significantly higher than pre-Covid-19 levels.

“The much reported squeeze on household spending has yet to materialise as consumers seem happy to carry on shopping. Limited availability of stock has created strong pricing dynamics, which means we are unlikely to see any big discounting this Christmas, and many retailers will be hoping consumers are willing to buy the most sought after gifts at any price. With rising costs putting a strain on most retailers, they will be placing all hopes that demand remains strong as consumers plan for a bumper Christmas, shopping early for those much wanted gifts and spending more than last year when Christmas gatherings were cancelled. The main concern is now how trade will develop post-Christmas into 2022. “

Food & Drink sector performance | Susan Barratt, CEO | IGD

“The food and drink sector saw another muted performance in October, with sales down versus 2020, when shoppers increasingly stocked up ahead of the second lockdown in November. Preparations for Halloween 2021 offered a slight boost to performance, though the actual day fell out of the reporting period.

“IGD’s Shopper Confidence Index reached one of its lowest levels (-11) in October. Our ShopperVista research reveals 28% of shoppers now expect food to get much more expensive in the year ahead, the highest level recorded, with increasing numbers signalling that rising food, energy and petrol prices are having an impact. However, with preparations for COP26 gathering pace in October, shoppers are torn in different directions. Some 40% stated that environmental impact was important when food shopping, up from 36% in September ’21. Helping shoppers navigate through rising prices while also addressing environmental concerns will be a key challenge for the food industry.”

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