Retail brands should be ‘acutely concerned’ after consumers suggested they would not be spending as much on big purchases this Christmas.
GfK’s Consumer Confidence index shows that people’s propensity to make a big purchase fell by nine points to a score of just five in November. This is a sharp contrast to October when the measure increased by five points.
Earlier this month, Marks & Spencer predicted strong consumer spend over Christmas 2016. Its executive director of marketing Patrick Bousquet-Chavanne told Marketing Week: “We saw sentiment go down after the June event [Brexit] but we are seeing it creep back up. Most of the KPIs we look at, and we have weekly sentiment feedback dashboards, are up quite positively.
“We feel good that there will be growth in this retail season. There is also a likelihood there will be more families staying on UK shores this Christmas which bodes well for UK retailers both digital and physical.”
However, Joe Staton, head of market dynamics at GfK, expects the majority of retailers to be more concerned than M&S.
He explains: “Despite recent strong retail sales, we are reporting a sharp nine point drop in the major purchase index this month and this will be an acute concern for retailers as they gear-up for the key Christmas selling period.”
Consumers worry about the economy
All five of the main GfK index measures saw declines in November, with the main consumer confidence index falling five points to -8.
British consumers’ confidence in the general economic situation over the next 12 months also fell five points to -22, while their feelings about the economic situation over the last 12 months dropped six points to -25.
Staton adds: “People are not fretting unduly about their personal finances – we are still just about in positive territory there. But when they look out at the general economy they are not happy either in terms of the past 12 months or the next 12 months.
That dour view of the economy appears to be impacting the willingness to spend on major purchases and that’s the last thing retailers want to hear at this time of year.
On Monday (28 November), the Organisation for Economic Co-operation and Development raised its projections for Britain’s gross domestic product (GDP) from 1.8% to 2% for this year and from 1% to 1.2% for 2017. It expects UK growth to hit 1% in 2018.
Despite the relatively optimistic prediction, it warned the lack of clarity surrounding Britain’s exit from the EU was still a “major downside risk for the economy.”