The significant drop in retail sales of more than 3% in December reported by the ONS this morning was not entirely unexpected, it is still disappointing that the anticipated rebound led by Christmas shoppers has failed to materialise.
There is clear evidence that bargain hunting Christmas shoppers tended to buy more modest beauty products and toys as presents rather than more expensive jewellery, tech and clothes. Overall and unsurprisingly, discounters had a good month.
While our food and drink retail clients reported that the drop in inflation helped somewhat during December, luxury retailers have complained that whilst international sales have remained encouraging, they continue to suffer from the lack of VAT free shopping.
Looking forward, the New Year has started in an equally flat fashion with any impact from the post-Xmas sales ruled out by events in the Red Sea leading to renewed concerns about higher inflation, damaged supply chains and higher living costs.
Unfortunately, higher business rates from April will also compound the challenges retailers face.