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Has digital impacted Christmas 2017 trading for UK retailers?

Most of the results are in, and as ever there was a real mixed bag of performances by retailers over the all-important Christmas trading period.

There were some notable sales rises in grocery, with Morrisons and Tesco reporting particularly encouraging increases, while retailers in other sectors including Joules, John Lewis, Ted Baker and Superdry also unveiled positive growth.

From a digital perspective, Ted Baker, Superdry and Boohoo.com stood out for their online results, with the former reporting a 35% year-on-year web sales increase in the eight-week period to 6 January 2018. Boohoo, which only sells products online, said the four months to 31 December saw a 100% jump in revenues, aided by its growing popularity but also by recent acquisitions not accounted for in last year’s results.

Debenhams, Mothercare, House of Fraser (HoF) and Marks & Spencer (M&S) were among those retailers announcing poorer Christmas performances, with HoF sales in the six weeks to 23 December down 2.9% year-on-year, and both clothing and food sales dropping at M&S during the key trading quarter.

Alarm bells

Alarm bells are prompting significant cost-saving decisions at HoF and M&S, with the former asking landlords for rent reductions and the latter announcing it is outsourcing half its IT team to Tata Consultancy Services. A steep 7.5% decline in online sales this Christmas for HoF – typically a high growth area for sales in fashion retail – does not reflect well on how the department store chain is being run, especially as so much investment and innovation has been directed towards its digital offering in recent years.

John Lewis Partnership traded well during the Christmas period, with gross sales in the six weeks to 30 December totalling £1.96 billion, which was up 2.5% on last year. There was a 1.4% sales increase reported at Waitrose and a 3.6% rise at John Lewis – but the decision to stay competitive on price has impacted margin, prompting the company to revise down earlier profit forecasts.

The partnership issued some digital stats, saying 65.5% of John Lewis click & collect sales were collected from Waitrose stores in the Christmas run-up, and Black Friday 2017 was John Lewis's most successful sales day in its history. The day contributed to the biggest ever week of sales at the department store chain – and they were up 7.2% year-on-year.

“No hiding for the digital laggards”

Hugh Fletcher, global head of consultancy and innovation at eCommerce consultancy Salmon, said: “The retailers who have spent time investing and learning about omnichannel strategies are those that are starting to pull away from the less digitally literate ones.

“The hard work of years of investment and organisational change is now visible, and with these stats there’s no hiding for the digital laggards.”

Results and comments from senior management at the Theo Paphitis Retail Group, which comprises Ryman, Robert Dyas and Boux Avenue, neatly summarised the topsy-turvy nature of Christmas trading in 2017.

Not only is the group a diverse portfolio of brands that gives a flavour of different sector performances, but the figurehead for the group, Theo Paphitis, is known as an astute reader of industry trends.

Like-for-like sales growth of 1.7% was delivered by the overall group in the six weeks to 24 December 2017, a result delivered through increases at Ryman (4.8%) and Robert Dyas (2%), but a decline at Boux Avenue (-2.8%).

Paphitis commented: “In all my years I have never seen it so hard and unforgiving where the shopper will punish you if you take your eye off the ball. I am therefore very pleased that we were able to deliver growth as a group.”

A change in consumer behaviour

Tellingly for a businessperson who has built his industry reputation on traditional shop-keeping practices and solid operational processes, as opposed to digital innovation, Paphitis noted a distinct change in consumer behaviour during the festive season.

“The dynamics were different for us again this year; as expected we saw further strong growth online across all our key brands, however, it was our heritage brands, Ryman and Robert Dyas, that managed to put in the strongest performances through stores,” he explained.

His three brands have seen significant investment in either new websites, online fulfilment processes, or supply chain systems, over the last 12 months.

He remarked: “Online is now the key to most retailers’ success or otherwise, thus I am pleased that our continued investment in this channel was rewarded with further growth: not only in Boux Avenue, as has been the case in recent years, but this year also in Ryman and Robert Dyas.”

Government thinking

On an industry-wide note, Paphitis added that the UK government is showing little interest in what he called a “key economic pillar” for the country, and had a stark warning for the industry off the back of its busiest period of the year.

“It has now become clear that governmental thinking around changes to business legislation, policy and taxation of revenues especially in the UK, is lagging well behind the development of the retail sector globally, which is creating more uncertainty and risk for retailers and thus the economy,” Paphitis said in his end-of-year trading statement.

“It really does feel like retail as we know it is creeping closer and closer towards the precipice. We continue to watch this space carefully but are not confident of improvements and see it as the biggest risk to our high street and physical shops.”