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UK retail Christmas trading: a round-up

Tesco announced its best Christmas trading performance in ten years following the recent festive period, Aldi said it experienced its “best ever” UK Christmas sales, and Joules’ positive momentum continued in December – but the overall picture for retail during its busiest time of year appeared challenging.

British Retail Consortium (BRC) figures, released in association with KPMG, suggested it was the worst December for ten years – with figures showing that total sales were flat and like-for-like trading was down by 0.7% compared to the same month in 2017.

Paul Martin, head of retail UK at KPMG, describes it as a period of “little festive cheer” for UK retailers, despite several of them slashing prices for extended periods, which he suggests has “seemingly not been enough to encourage shoppers”.

“Growth in food did provide a glimmer of hope, being among the few categories to notice an uptick,” Martin comments, reflecting on what the BRC-KPMG sales monitor shows as a 2.8% decline in non-food sales and 1.8% uptick in food sales in the three months to December.

Although an underlying message of negativity persists, supported by last week’s statistics from IMRG and Capgemini which showed UK online retail year-on-year sales growth hit an all-time low of 3.6% in December, there are some positive stories peppered across the industry. Common features, here, include confidence and flexibility in strategy, and a joined-up approach to serving shoppers across sales channels.

Joules, which recently revealed almost 50% of its sales are now online, reported an 11.7% year-on-year increase in retail sales in the seven weeks to 6 January, which was an improvement on first-half trading and was attributed to its ‘total retail’ model. Joules’ ‘total retail’ is described by the company’s senior team as an integrated platform which ensures there is a consistent customer proposition across its stores, concessions, web, marketplaces and country show shops.

Hugh Fletcher, global head of consultancy & innovation at digital agency Salmon, notes that with more and more people now shopping online – particularly in non-food categories – models like Joules’ are advised.

“The online approach has to be balanced,” he notes, adding: “By creating a strategy that encompasses marketplaces, retail websites and own brand websites, brands will be able to fully maximise sales throughout 2019.”

Fletcher remarks: “With no major retail peaks approaching, it’s no longer enough to drop the prices and ‘pray they pay’. Whether it’s confronting old foes like Amazon or exploring social media shopping, the need for a strong online presence all year round has never been greater.”

A different story for grocery

Although, in the main, the grocers are growing sales online, Kantar Worldpanel data shows that online grocery shopping is “failing to attract new customers”. It reported that in the crucial 12 weeks of trading to 30 December, online sales were up 3.9% on the same period in 2017 – but the analyst group said the growth stemmed from existing customers spending an additional £9.07 over the month of December.

Supermarket sales across all channels were said to total £29.3 billion for the 12-week period, which Kantar indicates was up £450 million year on year, although lower inflation of 1.3% – half the level recorded one year ago – took its toll on sales and tempered overall spend.

All the major supermarkets spoke positively about their Christmas performance, but Kantar’s 12-week data showed year-on-year sales increases for Asda and Tesco, flat trading at Morrisons, a dip at Sainsbury’s and Waitrose – although the latter said that like-for-like sales were up by 0.3% in the seven weeks to 5 January, despite reduced promotional activity.

According to the data, the discounters continued to make their mark over Christmas, with two-thirds of all households apparently shopping at either Aldi or Lidl over the 12-week period to give them their highest-ever combined Christmas market share (12.8%). With sales up 10.4%, Aldi was the fastest-growing supermarket during the festive season with the business saying it raked in nearly £1 billion in December alone.

Despite Kantar’s muted assessment about online’s impact on grocery, the UK's largest retailer Tesco did announce a digital landmark, with like-for-like web sales increasing by 2.6% over the Christmas period – this included the retailer’s biggest-ever sales week in online grocery, with nearly 51 million items delivered and 776,000 orders taken.

Tesco also reported a 3.8% year-on-year increase in Delivery Saver subscribers over Christmas, with the number of customers opting for this service reaching 491,000.

Winners and losers

So, what was it like for other sectors?

Hobbycraft, Majestic Wine, Matalan, and Next can be placed among the positive retail stories, and the commonality here was the digital sides of the business grew at a considerably higher rate than store sales. Hobbycraft saw Christmas sales in store and online rise by 7.1% and 28% respectively, but for the others the physical retail growth was much lower – or in the case of Next it fell by 9.2%.

Majestic Wine CEO Rowan Gormley sums up what was common for many retailers during the festive weeks, saying: “While trading has been challenging over the Christmas period, the trends we reported in November are the same, namely strong growth in our overseas markets and our digital propositions but headwinds for our UK retail stores.”

Like Joules, Hobbycraft is focusing on the components of its business that make it stand out from the competition, and it is also embracing all sales and customer communication channels. Albeit a relatively new offering, Hobbycraft’s “Christmas Eve Boxes” experienced a 119% increase in sales during the week they were exhibited in stores.

“A personalised present means so much more and Christmas is clearly the perfect time of year to create something extra special for loved ones,” explains customer director Katherine Paterson.

“Social media channels and influencers are helping to drive this trend and our results this Christmas show that crafting a thoughtful gift or decoration is a more enriching experience in these challenging times.”

It was not such a happy Christmas for Debenhams, where a like-for-like dip in Christmas sales led to the departure of chairman Ian Cheshire following a shareholder coup to vote him off the board. Meanwhile, Mothercare’s like for likes for the third quarter ending 5 January fell by 11.4%, with a sharp 16.3% drop in online sales a serious cause for concern.

The calling of administrators at Oddbins – according to Sky News – and HMV suggest it was not a particularly strong Christmas for those businesses – or certainly not good enough for them to continue operating in their current guise. And one of the publicly-listed retail players, Halfords, issued a profit warning off the back of a year-on-year retail sales drop of 2.2% in the so-called ‘golden quarter’.

The challenge ahead

Amazon, one of the most significant disruptors to the wider retail industry judging by many retail execs’ obsession with building strategies to combat it, has itself spoken, in American parlance, of setting a new “holiday sales” record in 2018.

It’s full fourth-quarter results are released this week, on 31 January. And following the positive festive trading review issued by the company on Boxing Day, analysts expect that overall revenues could come in ahead of previous estimates.

Business intelligence group eMarketer predicts that Amazon's worldwide eCommerce revenue will grow by nearly 26% this year to reach $483.96 billion, and that eCommerce sales will surpass 50% of all eCommerce sales in the US for the first time. That does not even reflect Amazon’s potential impact on physical retailing via the plans it has to grow its Whole Foods operation and Amazon Go convenience arm across the globe.

The stresses of Christmas may be over for the wider retail sector, but the battle for market share and sales growth, against some very powerful competition and the digital powerhouses, remains a significant challenge.