Analysts at GlobalData have joined the growing number of market watchers warning that retailers are set for a tough Christmas trading period with the total value of the food and non-food market forecast to grow by just 1% in the final quarter of the year.
It would be the worst result since 2011 with GlobalData blaming continued uncertainty over Brexit and the general election occurring right in the middle of the festive season.
Patrick O’Brien, the firm’s UK Retail Research Director, highlighted that there was hope that the outcome of the election will give a decisive result, which could at least unlock purses and wallets in the last two weekends before Christmas. However, he added: “Another hung parliament pointing to further elections, another referendum or a continued Brexit stalemate, could see that last-minute, present-buying rush turn into more of a wake for retailers”.
O’Brien also believes that Black Friday will kick-start a belonged period of discounting with sales launching earlier than ever as retailers grapple for a slice of shopper spend, despite taking a hit on margins.
Looking at individual sectors, GlobalData is forecasting that the food & grocery sector will do better than overall retail, with total growth of 1.5%. However, it will still be a challenging period for many retailers with year-on-year volume growth forecast to be flat, as consumers restrict food spend to reduce overall Christmas expenditure.
Following on from a successful Christmas period last year, Aldi and Lidl are expected to continue to gain market share, both through attracting more price-focused shoppers and increasing their accessibility to consumers via wider store networks.
The grocer with the greatest expectations of a turnaround will be M&S, which experienced a decline of 2.1% in food like for like sales in the fourth quarter of 2018. However, with its food division showing initial signs of improvement, M&S will be hoping that the combination of its established quality reputation and its ongoing change in strategy to focus on value, will help steal shoppers from its Big Four rivals.
In non-food, GlobalData is forecasting total growth of just 0.6%. In clothing & footwear, retailers are under pressure to deliver meaningful Black Friday discounts to entice consumer spending – a tough ask given the rife promotional activity so far this year, with shoppers becoming more immune to discounts.
While growth will be softer versus 2018, health & beauty is expected to continue to be one of the most resilient sectors in the festive quarter, benefiting from weaker demand for discretionary clothing & footwear purchases, as well as rising interest in premium health and wellness products.
However, GlobalData expects discounting to be prolific in the period, led by struggling department stores Debenhams and House of Fraser in an effort to drive much-needed traffic to their stores. Boots will also rely on promotions across beauty, skincare and fragrance to try and boost sales after a tough year and compete with the online specialists.
In the electricals, retailers’ long-planned promotions for Black Friday will be key to the sector’s performance in the fourth quarter. However, GlobalData is forecasting the lowest growth over the festive period since 2016 as low consumer confidence impacts big ticket purchases.
NAM Implications:
- Those consumers in the market will obviously benefit pricewise…
- More important for suppliers to ensure they get a fair share of investment and sales.
