Christmas shoppers to buy fewer and cheaper items this year as cost of living crisis persists

UK spending will be lower in real terms than last year as savings have been depleted and inflation remains high, say analysts

Britons are expected to buy fewer and cheaper items this Christmas – especially online – as the cost of living crisis forces many to rein in the celebrations.

While total spending will rise by 3.4% to almost £110bn in the final three months of 2023, according to retail analysts at GlobalData, shoppers will be looking for bargains and cutting back on the number of gifts they buy as inflation remains high at 9.3%.

“Sharply higher prices mean shoppers will spend less in real terms than last year, choosing either to trade down or trim the number of presents they buy. Last year sales growth was supported by shoppers spending savings built up during the lockdown. But with those savings now depleted by cost of living increases and mortgage rate hikes, consumers are likely to shop more cautiously and more savvily,” said Nick Gladding, lead retail analyst at GlobalData.

With budgets tight, online spending for Black Friday (24 November) is expected to be down by 2% year on year, according the IMRG trade body, despite high levels of inflation. It has predicted a 3% fall in the value of online clothing orders and an 11% dive in sales of gifts as families add fewer treats for friends, neighbours and children than in previous years.

The rise in the cost of deliveries and returns and more comfort with visiting high streets and shopping centres are also dampening demand for online shopping.

The predictions come after it emerged that the volume of clothing sales fell by 1.6% in September compared with August, according to the Office for National Statistics, which takes seasonal adjustments into account. That fall came before a now traditional dip in October when shoppers tend to hold back spending as they wait for Black Friday bargains to appear.

Industry insiders say clothing retailers are preparing to launch discounts early in November in the run-up to Black Friday despite having sold little at full price because of the mild autumn.

There will be no repeat of last year’s surprisingly buoyant autumn when households used savings built up during lockdowns. This year wage rises and high employment have helped offset the impact of inflation but savings have been run down.

While the volume of food sold has held up, competition for the Christmas pound is fiercer than ever. Tesco, Asda and Ocado have launched their online grocery delivery slots a week or so earlier than last year as they try to lock in shoppers at one of the peak times for home delivery. Waitrose has shifted a few days earlier as it said households were taking care to spread the cost of the festivities.

“When household budgets are stretched we see people planning further ahead for good times like Christmas. Searches on our website for Christmas products have been consistently up on last year since the end of August,” Waitrose said.

Strong wage growth and easing of inflation on essentials saw disposable income for households – the money left over after the cost of bills and essentials – rise by £9.09 a week in September compared with a year ago according to Asda’s Income Tracker survey to an average of £220 a household. However, disposable income was down month on month by £3.88, indicating a worsening situation in the run-up to Christmas, the “golden quarter” when retailers make the bulk of their profits.

Asda’s study also pointed to a stark difference between high and low earning households, with those on a tight budget faring far worse than the wealthy. About 40% of households now find the cost of bills and essentials exceeding the value of their post-tax income.

The lowest earning households had a shortfall of £75 a week in September – a quarter worse than a year before. Those in the next bracket up had a shortfall of £6 a week in September after experiencing a drop in disposable income of 180% year on year.

Contributor

Sarah Butler

The GuardianTramp

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