Deloitte has forecast zero growth in total Christmas retail sales as austerity measures finally take hold.
The business advisory firm said that while consumers tend to display “remarkable resilience” at this time of year, the gradual squeeze on disposable income means that a flat Christmas is the most positive outcome UK retailers can expect.
The outlook for next year remains weak and Deloitte expects no sustainable growth in retail sales until 2013 at the earliest.
However, it did forecast a 15% increase in online sales in December compared with the same time last year. Online retail accounts for 11% of the total annual retail market, but becomes disproportionately more important at Christmas.
Deloitte UK head of retail Ian Geddes said: “Online retailing was hit last Christmas when the massive nationwide snowfall forced some major players to stop taking orders because delivery became impossible.
“Assuming no repetition, continued growth in click-and-collect and increasing access through mobile phones and tablets will help boost sales. This year total online retails sales will exceed £30 billion for the first time.”
Deloitte’s research shows that the internet’s significance as a retail channel goes beyond online transactions, with more than 40% of all retail sales by value now digitally influenced with shoppers increasingly using the web for research, price comparison websites and social media recommendations.
Deloitte strategic adviser Richard Hyman said: “Christmas 2011 promises to be the most important moment in retail trading we have seen for many years. Demand has been softening throughout the year as the impact of the Government’s debt reduction strategy has started to filter through to the pockets of consumers. Therefore, it is very difficult to see where sales growth will come from this Christmas.”
Deloitte said cost growth is outstripping sales growth and outside food and childrenswear, an additional 2.5% of each sale now goes to HMRC in extra VAT.
Hyman added: “Whilst the quarterly rent bill at the end of December will find some retailers with insufficient cash flow, I expect the real crunch to come at the end of the first quarter of 2012. Only those able to win market share will be immune and we should anticipate an increased number of casualties.”