Against a backdrop of rising inflation and weakening consumer confidence, Mintel estimates that retail sales will see growth of less than 2% in December, to reach £44.6bn.
The forecast comes as Mintel releases new research which shows that many consumers believe that Christmas this year will be more expensive than they are used to.
As far back as January, 43% of people who bought gifts last Christmas were already worried that the Brexit vote would mean that Christmas 2017 would be more expensive and since then concerns over the cost of living have intensified. Just this morning the BRC revealed that shop prices were on the verge of inflation having dropped on 0.1% in September.
Mintel’s Consumer Confidence Tracker reveals that in October 2016 34% of consumers said they felt financially confident that they would be OK in the next year or so; this fell to 31% who said the same in September 2017. Additionally in September 2017 28% of consumers said they were worse-off than they were a year ago, which was up from 20% who said the same in October 2016.
Director of Retail at Mintel Richard Perks said said in light of the outcome of the research it might have been tempting to predict a drop in spending this Christmas but he said it wasn’t ready to put out such a gloomy forecast while retail sales continue to hold up “relatively well”, albeit they are largely financed by increased borrowing.
“The natural response to falling real incomes would be to cut back on spending. Added to the tough comparison against last year’s boom, retail sales would be expected to be lower this Christmas. But we don’t feel that we can justify such a negative forecast. Retail sales are holding up exceptionally well, even if they are largely financed by increased borrowing. It seems too close to Christmas for there to be a significant fall in spending this year. We also believe that people may well feel that next year will be tough, so they will have a good time now before reality strikes,” Perks said.
However the novelty of the Black Friday discounting bonanza towards the end of November, which has been imported from the US and which has become the informal start of the festive spending season in recent years, is beginning to wear off, Mintel reveals.
Last year 32% of British consumers bought items during last year’s Black Friday promotions, while a further 20% browsed products but did not buy. Of those that bought more than half (52%) said they purchased items they had not intended to buy and 39% bought items because they were worried the prices would rise this year.
However there were signs that Black Friday fatigue was setting in with 28% of consumers saying that the discounts on offer were not genuine. Meanwhile, of those who bought Christmas gifts on Black Friday or Cyber Monday in 2016, 49% said they bought less during Black Friday than they thought they would, while 34% bought gifts that they later regretted.
Perks said the event is now being driven by sales of electrical goods and that it appeared to have hit its peak last year. “Black Friday has been a major distorting factor in Christmas demand over the last few years and there are some signs of disillusionment creeping in. Discounting in the run up to Christmas is usually a sign of distress and those who do take part will be retailers who are having trouble selling at full price,” he said.