U.K. consumers resisted splashing out on Black Friday deals as buoyant inflation and the first interest-rate increase in a decade weighed on discretionary spending, data released Dec. 5 showed.
Retail sales increased 1.5% year over year in November, or 0.6% on a like-for-like basis, according to the monthly retail sales monitor compiled by the British Retail Consortium and KPMG.
"Retailers will be wondering whether the juice is worth the squeeze, with Black Friday sales resulting in a meager 0.6% uptick in like-for-like growth, when compared to November last year," Paul Martin, head of retail at KPMG, was quoted as saying in a statement. "In what has been a difficult year for the industry, any growth is most welcome, but profitability is what remains paramount."
It means that the final few weeks of 2017 could be critical for retailers. "In what remains of this year, the difference between success and failure will be akin to retailers walking a tightrope. Retailers would be wise to focus on differentiation, personalization and ensuring the availability of their products in the coming weeks," Martin added.
The U.K.'s inflation rate in October was 3%, according to the Office for National Statistics. The Bank of England on Nov. 2 hiked interest rates to 0.5% in a bid to rein in inflation. It was the U.K.'s first rise in rates since 2007.
Consumers appear to be feeling the pinch, so they are opening their wallets only for essential items or irresistible offers. "This year's Black Friday has demonstrated that in such a tough economic environment, consumers have become ever more careful, willing to wait and deploy their discretionary income only when they see an exceptional bargain," said Helen Dickinson, CEO of the BRC. "That heralds a challenging festive period ahead for retailers and shoppers alike."
Over the three months through November, in-store sales of nonfood items fell 3%, or 3.7% on a like-for-like basis. On an annual basis, the decline was 2.2%, the steepest since monitoring began in January 2012. Meanwhile, food sales over the three months through November jumped 4%, or 2.8% on a like-for-like basis.
"Black Friday, the big retail event of the month, failed to fundamentally shift underlying trends in spending," Dickinson added. "Food sales were responsible for pretty much all the growth [in November] as higher prices continue to absorb more of the weekly shopping budget."
Online sales of nonfood items in November rose 6.5% year over year, an indication that retailers are shifting Black Friday promotions away from the high street.
"November's muted spending figures reflect the cautious mood of the nation," Barclaycard said in a Dec. 5 report that showed consumer spending grew 2.8% year over year in November, below the rate of inflation.
