Analysis: ONS figures show slow-down in December retail sales growth indicating changing consumer behaviour

Official retail sales figures released by the Office of National Statistics (ONS) today demonstrate the changing pattern of consumer behaviour with Christmas shopping being brought forward to November, as a result of Black Friday, along with the increasing migration to online shopping and general belt-tightening.

The latest figures show that while the final quarter of the year showed growth in sales year-on-year in terms of the quantity bought (of 0.4%), it is the weakest quarterly growth seen by the ONS since the decline of -1.2% in Q1 of 2017.

Furthermore, while December 2017 showed a 1.4% increase in quantity year-on-year, it was down -1.5% on November, which was a strong month for retail due to the Black Friday sales bonanza towards the end of the month. In value terms December was also down on November by -0.9% (see table below).

ONS Senior Statistician Rhian Murphy said: “Retail sales continued to grow in the last three months of the year partly due to Black Friday deals boosting spending. Consumers continue to move Christmas purchases earlier, with higher spending in November and lower spending in December than seen in previous years.

"However, the longer-term picture is one of slowing growth, with increased prices squeezing people’s spending. Over the year the proportion of internet spending is continuing to rise, with almost one in every five pounds spent online by the end of 2017.”

The chart below shows how November has begun to increase in importance since the arrival of the Black Friday. The post-Thanksgiving sales phenomenon was virtually unheard of in the UK in 2012 and 2012, then in 2013 major American retailers, such as Walmart-owned ASDA, and online giant Amazon began Black Friday promotions in the UK and it has since established itself very quickly as a significant calendar event for UK shoppers and has come to signify the start of the festive shopping season. As such the balance has now tipped in favour of November becoming the month when retailers see the most significant spike in sales.

For the entire year of 2017, growth in quantity terms was up by 1.9%, which is the lowest annual growth seen since 2013 (in 2016 volume growth was 4.7% and in 2015 it was 4% by comparison). Internet sales, as Murphy said above, continued to rise with multichannel retailers (i.e. those who also have physical stores) seeing the most growth.

In December online sales accounted for 18% of all retail sales (up from 17.1% in December 2017). However growth here too is slowing. The 9.4% year-on-year growth in December is slower than the pace of growth in previous months. The largest contributor to this slowdown is "non-store retailing" (i.e. those online retailers without physical stores), which grew only by 3.7%. However pureplay etailers, by far, are the most important contributor to the overall online spending figure, accounting for 79.4% of all money spent in internet sales (see table below).

Stores with a physical presence continue to increase their online spending, the ONS said, with strong year-on-year growths across all sectors, with fashion in particular growing strongly. Textile, clothing and footwear stores increased online sales by 20.9%, followed closely by household goods stores with a growth of 17%. Online sales from stores with a physical presence are the largest contributor to the overall growth in December 2017 with 7.5% of the total 9.4% growth coming from multichannel retailers.

Craig Smith, VP of customer success at retail engagement summit Amplience, said retailers would greet the figures like a "belated lump of coal in their Christmas stocking." "Disappointing December trading figures only compound the reality that retailers aren’t doing enough to engage customers. In this uncertain economic and political climate, deep discounts and speedy deliveries may no longer be enough for retailers to survive," he said.

With the slew of New Year profit warnings (and some truly impressive trading updates from brands such as boohoo, Ted Baker, Superdry and Joules to name a few) it is clear that the market had become a "two-speed affair", Smith said, dividing into those retailers "unable to keep up with their customer’s demands and those able to adapt and capitalise quickly on the latest trends."

“The customer experience has changed beyond all recognition, becoming more mobile-centric and social-media focused than ever before. In order to succeed in today’s world, retailers must deliver targeted, enticing content that is optimised for mobile. Retailers who have failed to realise this don’t have much time left!” Smith warned.