Retailers hope early Christmas spend is enough to offset Omicron

Commenting on the November ONS retail sales data, which showed an increase in retail sales volumes of 1.4%, Jacqui Baker, partner and head of retail at RSM UK, said: ‘It’s good to see another uplift in retail sales in November with Christmas shopping and Black Friday deals driving sales up 1.4%. Consumers have been splashing out on clothing, jewellery and toys getting ready for Christmas festivities with non-food sales up by 2%. However, the knock-on effect of supply chain issues and global shortages in core components, such as microchips, impacted Black Friday deals this year which left some consumers disappointed due to low stock, particularly those looking to grab a tech bargain.

‘If there is a silver lining, it’s that supply chain disruption has brought Christmas spending forward to ensure presents arrive on time, which might offset any slowdown in sales in December as we enter another period of uncertainty.

‘Falls in online sales over the year is a natural rebalancing as stores reopened following Covid lockdowns as consumer spend is spread between multiple channels. However, if further restrictions are put in place then we could see a shift back to mostly online sales.

‘Retailers look to the Golden Quarter to build cash reserves to see them through the first quarter of the year, but the unfolding situation around rising Omicron cases and extra restrictions will hit consumer confidence and sales in December. As Christmas parties get cancelled, partywear will remain on the rails; so, retailers may find themselves stockpiling this season’s product until next year – tying up money in stock as we head into the New Year. However, any slowdown in non-food sales could be counterbalanced by an uplift in food sales if families focus Christmas celebrations on the big day.’

Thomas Pugh, economist at RSM UK, added: ‘The small rise in total retail sales volumes in November will give a much needed boost to consumer spending and GDP. However, omicron has significantly darkened the outlook for the next few months. Indeed, consumer confidence, released separately, fell from -14 in November to -15 in December and GDP will probably fall in December and January as consumers retreat in the face of new restrictions, Omicron and soaring inflation.’