As a fuller picture of Christmas trading begins to take shape, it is emerging that retailers with stores fared better. Is bricks-and-mortar back for good, or will a new year bring new headaches?

Despite the ongoing pressures of the cost-of-living crisis on disposable income and the disruption of rolling rail strikes, footfall to all UK retail destinations rose 5.8% month on month in December, according to data from Springboard.

Footfall jumped 40% year on year on Boxing Day as customers flocked to high streets, shopping centres and retail parks hunting for bargains at the beginning of the traditional Sales period. 

The strength of trading in stores has also been borne out in the rush of Christmas trading updates from retailers. Across every category, a pattern has begun to emerge – retailers with store estates and an integrated multichannel offering fared well over the Christmas period. 

“Stores are a core part of M&S’ omnichannel future and serve as a competitive advantage for how customers want to shop today”

Stuart Machin, Marks & Spencer

High street stalwart Marks & Spencer is a prime example. Trading in stores was up 12.8% over Christmas, which chief executive Stuart Machin attributed to “standout early performances from new stores… which are part of the store rotation programme”.

In the days following its bumper Christmas announcement, the retailer has unveiled plans to open 20 new “bigger and better” stores, creating 3,400 jobs. Machin said the proposal would bring new store investment to £480m and added: “Stores are a core part of M&S’ omnichannel future and serve as a competitive advantage for how customers want to shop today.”

Sainsbury’s boss Simon Roberts put the surprise success of general merchandise business Argos down in part to grocery customers being able to click-and-collect orders from supermarkets.

Lush UK and Ireland boss Kat Hannible credited the retailer’s £7.4m investment in high streets stores for its bumper Christmas, while fashion brand Seasalt hailed record in-store trading over the period but warned of more issues for the online channel to come. 

Perfect timing

Pureplay retailers, by comparison, have, with the odd exception, struggled over the festive period. Amazon has announced it will be cutting 18,000 rolesAsos posted a dip in sales for the period. N Brown struggled and digital wine specialist Virgin Wines warned on profits

Greggs London

Greggs capitalised on the pandemic downturn in rents to take space in central London

In grocery, pureplay giant Ocado said revenues slipped 3.8% over the final quarter of the year and Ocado Retail boss Hannah Gibson warned falling basket volumes would continue into 2023.

PwC senior retail adviser Kien Tan says the reasons for the success of stores over the Christmas period were many; some planned and others more by chance

“For stores, the timing was perfect. You had that run of cold weather, combined with the postal strikes, which made it harder for people to know with certainty whether gifts bought online would arrive in time for the big day, and then the general drift towards people shopping later in the month,” he says.

Tan says PwC data shows 51% of customers pushed their Christmas shopping later into December. This was down to many retailers “holding their nerve” over Black Friday and sticking to full price in stores. This had the dual effect of ensuring good availability of products in stores and will have gone a long way to protecting margins over the golden quarter. 

“The retailers also did a great job. They worked really hard to make sure their shops looked good and that they had the right stock available in the right places. Everything fell in the right place for them and the numbers fell in the right place,” he adds. 

Read your customers

While the last few weeks have clearly given bricks-and-mortar retail a shot in the arm, is that uplift likely to lead to a reversal in the trend of the last few years of retailers rationalising store estates and reducing floor space?

Food-to-go giant Greggs is one retailer that has capitalised on the downturn in rents in destinations such as central London over the pandemic to explore taking space it would never have considered otherwise. 

Chief executive Roisin Currie says: “We will always look for the right opportunities and look for places where there’s high footfall, where customers are travelling to and from other places. And wherever those opportunities present, we will try to take advantage.”

Managing partner at retail property firm GCW Simon Morris says retailers will not be getting carried away with the performance of stores over Christmas and instead has hailed a “return to being sensible” on store estates.

“Christmas was a bit of a last hurrah for customers. The next six months are going to be really hard. People will be dealing with inflation, credit card bills and the cost of living in general”

Kien Tan, PwC

He says: “Retailers aren’t going to suddenly start taking huge volumes of new stores like they may have in the past. It’s increasingly important to be able to read your customers and meet their needs across all channels. 

“It’s just as important to be able to ship to store for click-and-collect or fulfil online orders from stores, as the store itself is. Retailers are now looking at how customers from different places shop with them, rather than looking at population density and wondering why they don’t have a store in every town with more than X-thousand people.”

For all the positivity around the performance of stores, the numbers show footfall has not recovered to pre-pandemic levels. In December, the gap versus 2019 closed to -10.9%, and Springboard marketing and insights director Diane Wehrle predicts it will increase to -20% in January. 

“Despite the positive outcome for retail destinations in December, it is indisputable that the strain on household budgets due to the cost-of-living crisis is likely to begin in January and the first quarter of 2023 will be challenging for retail,” she explains.

Tan agrees and predicts that both physical and online retail may struggle in the first six months of the year.

He adds: “Christmas was a bit of a last hurrah for customers. The next six months are going to be really hard for retailers and customers. People will be dealing with inflation, credit card bills and the cost of living in general.”

While the good times might not last much beyond the new year, this Christmas has given physical retail a real boost after an unprecedented few years.

Footfall still has not recovered to pre-pandemic norms but the last few weeks and months have proved the death of the store has – once again – been greatly exaggerated.