“In the Bleak Mid-Winter” may well become the Christmas carol U.K. retailers adopt this holiday season. Because it’s a bleak forecast in every category other than food and e-commerce, as consumers tighten their belts when it comes to non-essential spending.
Clothing sales are predicted to go up by just 1.6 percent year on year from December 2017, meaning the spending during this year’s “golden quarter” will be significantly smaller than the 2.3 percent increase we saw in the same period in 2017. Food, by contrast, will rise by 3.3 percent to 18.6 billion pounds ($23.7 billion), benefitting from a mix of inflation and competitive supermarket pricing.
New Look, House of Fraser, Marks & Spencer, John Lewis and Debenhams will all be hoping for a good holiday period after the downturn they have experienced this year. Recent data from Springboard, which counts shopper numbers, showed high-street footfall down 2 percent in October—the 11th consecutive month of decline—and illustrating that, overall, this was one of the least profitable retail years in British history.
These low figures are due to a number of factors including low consumer confidence linked to the uncertainties of Brexit, alongside rising costs from business rates and the switch to e-commerce fulfillment rather than brick-and-mortar shopping.
Another recent factor is the weather, as fall and winter have been unseasonably mild in the U.K. this year, rarely dropping below 60 degrees Fahrenheit until mid-November, which is highly unusual for the area. This has led to sluggish purchases of winter collections, even for brands such as John Lewis—despite its major overhaul earlier this year, the retailer reported an 11 percent drop in clothing and homeware profits in the week ended Nov. 11.
However, there was one bright spot on the horizon, and it came beaming in from American shores.
This year, Black Friday was given a starring role in the British retail calendar for the first time ever. Unheard of in the U.K. until a few years ago, Black Friday has now transformed the pre-Christmas retail market—with mixed results.
“We can already say that 2018 has been the toughest retail year anyone can remember,” said retail analyst Richard Hyman. “But first, [let’s analyze] Black Friday. This is a promotion whose effectiveness is questionable even in the USA. But at least in the U.S. it has a little logic, following Thanksgiving with retail needing to get people spending again. Meanwhile, Christmas in the USA is traditionally a much less significant retail spending spike than here. Here, [Black Friday] comes along just as retailers need to start promoting their Christmas offers. It merely sucks spending forward at discounted prices, and therefore lower margins.”
Black Friday may sit awkwardly on the British shopping calendar, but it appears to have pulled a couple of brands back from the abyss. John Lewis booked the biggest sales week in its history as shoppers’ appetite for deals on fashion, beauty and electronics soared. The results were impressive—sales were up 8 percent in the week to Nov. 27 on the same period last year, with sales in the fashion and beauty department up 13 percent.
“After weeks of weak numbers, Black Friday seems to have been good for [John Lewis],” said Hyman. “But no one should start extrapolating to the wider market and thinking Black Friday was a raging success. Across the retail market for now, beware [of] claims of apparent trading success. They are likely to be a form of virtual reality.”
Black Friday has succeeded in creating an overall healthier picture for November after a very weak October. However, it has been unable to prevent an eighth straight quarter of declining employment across the retail sector. Business sentiment remains poor, investment intentions are flat, and headcount continues to decline—whether Black Friday heralds a Christmas with the clout we need to turn those figures around is debatable.
“Analyzing Black Friday independent of Christmas is a luxury only non-retailers can indulge in,” Hyman said. “The two are inextricably bound together. Christmas trading patterns in U.K. retail have changed materially since this most crazy of all U.S. imports has kicked in. Sucking business out of December and into mid-November will obviously impact fundamentally trade over the Festive Season.”
However, it’s not all bleak. Online retailers like ASOS and Boohoo are expected to be the biggest winners this Christmas season thanks to festive discounts and Instagram targeted ads. Online sales are expected to rise by more than 14 percent to 5.6 billion pounds ($7.13 billion), or nearly 12 percent of all retail spending, as an increasing number of shoppers buy gifts from their desks. So, while brick-and-mortar stores may be set to have a Scrooge-like Christmas, there should still be a few festive celebrations in the realms of British e-commerce.