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High inflation to drive Christmas spend this year

By Vivian Hendriksz

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Management

London - High inflation rather than strong volumes is set to drive Christmas spend this year, as fashion retailers are in for a disappointing holiday season, according to GlobalData. Total retail sales are predicted to grow 1.9 percent during the fourth quarter - and although this is up on the 1.5 percent increase reported last year, this bump will be entirely driven by inflation as sales volumes are expected to remain flat.

Clothing and footwear retailers will continue to struggle this Christmas after a poor third quarter. While some high street retailers will be hoping to end the year on a more positive note, the holiday trading period is likely to disappoint many across the sector with another quarter of declining volumes, down 0.6 percent on the fourth quarter 2016 in spite of retailers best efforts to stimulate spend through discounting and newness.

Fashion retailers prepare for a tough Christmas trading season

Weak sales during early Q4 may tempt more retailers to take part in Black Friday this year, even though this runs the risk of bringing forward sales which could have been made at full-price later in the year - this is particularly true for retailers operating in the clothing and footwear industry, who have shied away from fully participating in the discount-fuelled day in the past.

However, leading fashion retailers who have traded well throughout the entire year, like Primark, Zara, Very, Selfridges, JD Sports and Kurt Geiger, will continue to prosper in Q4 thanks to their compelling and unique propositions which help them stand out. On the other hand, fashion retailers who have suffered throughout 2017, such as Next, Debenhams, New Look and Arcadia Group, are likely to continue to struggle through the holiday trading season.

On the flip side, the health & beauty market is slated to become the strongest performing sector during this period, with spend up 3.4 percent and volume growth positive. New fragrance and makeup launches, such as Chanel Gabrielle perfume, Rihanna's Fenty and Victoria Beckham x Estée Lauder make-up ranges are set to drive gifting spend, as well as innovation-led skincare which ties into the ‘clean’ trend and wellness revolution.

Online fashion pure players, such as Asos, the real winner of Christmas

Department stores are set to face increased competition this year from Asos and other online beauty pure players, who are very fierce on price and fulfilment. In addition, the online channel is also predicted to continue to outperform physical sales growth. Leading players, such as Asos and Amazon, are set to become the real winners this Christmas, enticing consumers online with their wide product range and delivery services.

"The increased availability of delivery saver schemes this year, such as Next Unlimited, Boohoo Premier and New Look’s delivery pass, alongside express delivery options being widely accessible, will encourage shoppers to leave online purchases later, having the confidence to purchase right up until the last few days before Christmas," says Eleanor Parr, Retail Analyst at GlobalData.

"Newly introduced ‘try before you buy’ delayed payment options being offered by clothing & footwear retailers such as Topshop, H&M and Asos will further entice shoppers online over the Christmas peak as budgets are constrained by the rising costs of essentials and consumers look for convenient ways to manage their spend."

Photos: via Pexels

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