The British Retail Consortium (BRC) has painted a challenging outlook for both consumers and retailers in the upcoming year.
According to the trade body, escalating living expenses will continue to tighten household budgets, while businesses will grapple with increased business rates and potential shipping disruptions through the Red Sea.
Despite a lackluster Christmas season, alternative data suggests a willingness among consumers to spend more on vacations in 2024.
Helen Dickinson, the BRC's chief executive, highlighted that "fragile consumer confidence restrained spending" during the critical festive trading period.
BRC-KMPG retail sales monitor data revealed a mere 1.7% rise in retail sales in December across the UK, a significant drop compared to the 6.9% surge witnessed the previous year.
While there was a marginal uplift in sales just before Christmas, predominantly online due to adverse weather conditions, beauty products and health-related items were preferred as gifts, while clothing and jewelry sales dwindled.
However, post-Christmas sales did not entice customers to splurge on larger-ticket items like furniture or home goods.
'Battening down the hatches'
Paul Martin, KPMG's UK head of retail, indicated that "cautious consumers are battening down the hatches," implying a probable dip in demand for retailers in the initial months of 2024.
Despite declines in inflation rates and recent cuts to National Insurance rates, he suggested that the cumulative economic challenges faced over the last two years were now having an impact.
Separate data released on Tuesday indicated that consumers diverted spending from Christmas presents to prioritize savings for travel, gig tickets, and festivals.
While December witnessed a surge in holiday bookings, Glastonbury ticket sales, and cinema releases, shopping activities tapered off, as per Barclays' data.
Consumer card spending in December registered a 2.3% year-on-year growth, notably lower than November's 2.9% growth.
Clothing and department stores experienced declining sales last month, following a surge in November, potentially due to earlier festive discounting by retailers.
Entertainment and travel spending, however, saw a substantial uptick by 12.3% and 14.1% respectively, driven by experiences and getaways, with airlines and travel agents benefiting notably.
Beach holidays, city breaks, and adventure trips emerged as popular choices among travelers.
The sales and marketing director at Skiworld, Diane Palumbo, acknowledged a slight uptick in trade lately but noted some signs of the cost of living crisis influencing people's future spending decisions.
Digital subscriptions for entertainment witnessed robust growth as consumers opted to stay home during the holidays, catching up on latest releases such as The Crown and Chicken Run: Dawn of the Nugget.
On Tuesday, the Digital Entertainment and Retail Association reported a 7% surge in UK music, video, and games sales to £11.9bn, primarily propelled by the booming video sector attributed to subscriptions like Netflix and Amazon Prime Video.
Music sales also surged by 9.6% to £2.2bn, marking the highest level since 2002, buoyed by increased subscription revenues from Spotify, Amazon, YouTube, and Apple.
Miley Cyrus's track "Flowers" emerged as the best-performing track, while vinyl sales also stood out among consumers. Photo by Alessandro Santarelli, Wikimedia commons.