High street business owners ended 2017 with the steepest decline in sales for five years, as retail experts warn consumer spending power has been absorbed by essential items.
According to fresh figures from the British Retail Consortium (BRC) and KPMG, year-on-year retail sales declined 0.6 per cent in December 2017. In contrast, year-on-year sales in December 2016 had increased by one per cent.
The greatest indication of the tough environment in which high street retailers finished 2017 was the disparity between food and grocery sales and non-food items.
While food sales rose 2.6 per cent in the three months to Christmas, non-food sales in the UK decreased by 1.9 per cent, the lowest since March 2009.
“The divergence between growth in sales of food and non-food has never been so stark,” said Helen Dickinson, chief executive of the BRC.
She added: “With inflation outpacing income growth, shoppers continued to see more of their spending power absorbed by essential items, including food, leaving less left over for buying Christmas gifts.”
Overall, Christmas trading delivered year-on-year growth of just 0.6 per cent. However, online sales rose 7.6 per cent.
“Whilst a proportion of this divide can be attributed to Cyber Monday, shoppers are increasingly preferring to shop online, especially at Christmas,” said Paul Martin, head of retail at KPMG.
Martin added: “Grocers benefitted from festive feasts, but growth elsewhere on the high street was otherwise rather muted for the time of year. In contrast, all online categories grew, with health and beauty, shoes and clothes proving particularly popular.”
With ecommerce closing in on bricks and mortar retailers, Dickinson explained that an added online effort – alongside reduction lines – helped some business owners keep their head above water.
Retailers who did well in such a challenging environment got both their discounting strategy and omni-channel offerings right,” she said.
“Those who could offer and deliver on last minute delivery options did better, boosting online non-food sales more than 15 per cent in the seven days before Christmas, a week when, until now, shoppers would have had to turn to stores to ensure gifts made it under the tree in time.”
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