Despite initial fears that the UK’s vote to leave the European Union (EU) would damage consumer confidence, Brits have continued shopping and spending. This “Brexit bounce” is set to gift UK retailers bumper growth this Christmas, according to the latest report from Fung Global Retail & Technology, a retail think tank dedicated to emerging retail and tech trends. Its analysts anticipate that holiday retail spending will grow by a robust 3.5% year over year, but the increase could be as much as 4% if recent strengthening trends continue. Brits are expected to spend around £2.5 billion more than last Christmas, with tills ringing up a total of £73 billion in sales in the final two months of the year.
This improved performance will come as a relief to retailers following last year’s Christmas retail season, which was the weakest in 25 years. “In 2016, we have seen sales growth tending to trend upward,” writes Deborah Weinswig, managing director of Fung Global Retail & Technology. “In fact, this strengthening really gathered pace following the UK’s June vote to leave the EU.”
Online pure plays set to win big; grocers likely to improve
Not all sectors will enjoy a bumper Christmas: apparel specialists and department stores are expected to continue to see muted demand for clothing.
“Apart from undemanding comparatives from last year, there is no reason to think apparel stores will have a good holiday season,” writes Weinswig.
Internet-only retailers are set to steal the show this Christmas, outperforming in apparel and tapping demand for tech. Internet pure plays are expected to buck the trend of a weak apparel market, with ASOS and boohoo.com likely to maintain their very strong growth, Amazon likely to benefit from its ongoing march into the apparel category and Zalando set to receive a boost from its current, major advertising campaign.
Fung Global Retail & Technology expects sales in the nonstore retail segment, which includes Internet pure plays, to jump by 13% this holiday season.
Outside e-commerce, sales will receive a boost from stronger performance by food retailers. The hard-hit food retail sector has seen steady improvements so far in 2016, moving from falling sales to positive growth, according to data from the Office for National Statistics.
Fung Global Retail & Technology expects food retailers to see sales grow by 2% year over year this holiday season. Although modest, this is an improvement on flat sales last Christmas.
Winning categories: putting the IoT under the tree
In product terms, Fung Global Retail & Technology expects many shoppers to “put the IoT under the tree” this Christmas, with Internet of Things (IoT) products set to excite shoppers and fly off the shelves. This holiday season, the Amazon Echo and the Oculus Rift will join more established products such as smartwatches and fitness trackers to bolster choice in IoT products. The tech and electrical-goods categories, more broadly, will also be boosted by the Apple iPhone 7, wireless headphones and the Dyson Supersonic Hair Dryer.
Experiential gifts and spending on services are also likely to win shoppers over this holiday season. Consumers have been growing their spending on services solidly so far this year and this trend is likely to be manifested in strong sales of gift cards and subscriptions for nonphysical products (such as downloads) and services, as well as in spending on services in lieu of goods.
“Shoppers are opting to spend more on leisure services such as tickets to events and dining out than at retail,” Weinswig concludes. “Any potential hit to retail will come from shoppers spending on services instead of products.”