It was late, cliff-hangingly late. But, as usual, Christmas did come for retailers.
Last week’s lacklustre update from Next put the frighteners on the City. But the December industry sales data from the BRC and KPMG showed a 1% rise in like-for-likes.
Hardly fireworks, but enough of an uplift to prompt some sighs of relief.
Behind the headline number, the picture was more nuanced and should prompt thought in boardrooms about what is to come.
While industry sales were up in December, 1.7% in total, retailers’ fortunes varied.
Ups and downs
Food was the star of the show – also evidenced by the latest Kantar and Nielsen stats – as grocers enjoyed their best festive period in years.
In contrast, general merchandise performance was described as “sluggish” by the BRC.
Traditional retail challenges such as the weather and intensity of competition aside, you wonder the extent to which this may also reflect factors such as a trend of spending on experience over product.
“These diverging trends may continue into 2017 so retailers face continued pressure to appropriately diversify where they can – for instance by improving in-store eating options and services”
Visa’s Consumer Spending Index, also published this week, showed that spending on recreation and culture climbed 6.4% in December, while hotels, restaurants and bars advanced 7.3%.
Clothing and footwear, on the other hand, was down 1.1%.
These diverging trends may continue into 2017 so retailers face continued pressure to appropriately diversify where they can – for instance by improving in-store eating options and services – to ensure their shops retain destination status.
The need to ensure the relevance of stores and wider estates, was evident in another finding from the BRC survey.
In the three months to December, in-store sales fell 1.2% in total and were down 1.4% like-for-like. In contrast, online sales rose 7.2%.
That may not reflect the role played by shops in services such as click-and-collect, but is another sign that new purposes must be found for bricks-and-mortar as the old retail model’s economics are challenged by the growth of multichannel.
Beating Black Friday
But retailers can adapt to change, as perhaps shown by another intriguing feature of December’s industry performance – Christmas week was bigger than Black Friday, an about-turn on the previous year.
The change indicated that retailers have found ways either to properly manage the promotion or, in a few cases, resist the temptation to join in.
“Will Black Friday decline in importance from here on in? For some retailers it works, but it would be no surprise to see others further scale back involvement or come up with alternative strategies”
Will Black Friday decline in importance from here on in? For some retailers it works, but it would be no surprise to see others further scale back involvement or come up with alternative strategies.
With Christmas out of the way, the focus is now on building momentum in 2017.
Total retail sales growth in 2016 was only just above the previous year, the BRC reported.
It would be good to have started the New Year with stronger momentum, especially with challenges such as higher costs and political uncertainty ahead.
When he updated on Christmas, tycoon Theo Paphitis told Retail Week that the industry faces a “perfect storm”.
However, with the optimism and confidence typical of an entrepreneur, he also said he’s “never known a more dynamic time for retail”.
That mixture of realism and determination to rise to the challenge will be called for across the industry this year.