To find out which sectors are feeling very merry going into the new year, and which had a tougher time in 2024, we asked retail data experts CACI to track how spend has shifted this year
It’s been a good year for…
Value variety discounters
According to CACI data, most value variety discounters recorded consistent growth across most months, following particularly stellar growth in late 2022 and early 2023 when the cost-of-living crisis was front and centre of consumers’ minds.
There have been some dips, but analysts believe these retailers will remain strong as long as the economic environment remains uncertain. The retailers benefit during times of inflation, reduced confidence and when shoppers are on the hunt for better value – all of which there’s plenty of in the current macroeconomic environment.
Share of wallet for these retailers was 12% in 2021 and now stands at 14%.
Beauty and toiletry retailers
Another sector that has captured more spend is beauty. The primary reason for this is what is known as ‘the lipstick effect’, where consumers treat themselves to smaller, more affordable luxuries like a fancy teapot rather than, say, investing in a new kitchen.
According to CACI, the beauty retail sector demonstrated steady growth, especially in the first half of 2023, and has maintained stability and share of wallet has risen 1% since 2021.
Quick service restaurants
The sector played in by the likes of Nando’s and McDonalds has been one of the most consistent performers across the data, with significant growth from late 2022 and early 2023.
Brits are reportedly placing more importance on the value of a meal out with their friends or family, but spend has shifted towards more affordable eating options now that consumer confidence has weakened – meaning huge growth for this sector.
Lower prices and full visibility of them alongside fast service with a relaxed atmosphere has resonated well with today’s consumers, who have continued to visit them despite ongoing inflation.
The share of wallet in this sector has grown from 12% in 2021 to 14%.
Cafés and coffee shops
Brits seem resistant to cutting back on caffeine, despite the cost of their drinks shooting upwards in recent years. There’s been consistent growth in the sector, according to CACI and it has benefitted from the “affordable treat” mentality that has also benefitted beauty retailers.
Share of wallet has remained steady here, hitting 5% up from 4% in 2022.
Future trends and predictions for 2025 from CACI analysts:
- Increased focus on value and affordability: Categories such as bargain stores and QSR are expected to continue to grow as consumers prioritise value over luxury in the face of inflation and economic uncertainty.
- Discretionary spending declines: Sectors like jewellery, department stores, and salons and spas are likely to see continued declines as consumers cut back on non-essential items.
- Shift to experiences: Sectors such as cafés, restaurants, and leisure activities may stabilise or grow slightly as consumers shift focus to experiences over products. However, these may be more budget-conscious options, reflecting broader economic pressures.
- Autumn 2024 Budget: Increases to the National Living Wage in 2025 may leave some consumers with more disposable income and increased spending power. However, rises in employer NIC contributions may mean that prices rise as costs are passed onto the consumer, particularly impacting categories like retail, dining and service where labour costs are high.
And a tough year for…
Department stores
“Consistent and significant declines” have made it a challenging few years for department stores, which saw a particular drop from late 2023 onwards.
According to CACI analysts, the shift in spend relects shoppers’ move away from traditional retail and towards more niche or discount offerings from other retailers, as well as an increasingly online shopping environment – a channel that many department stores have struggled to make a great success of because of competition from Amazon.
Big-ticket household spending
We’ve finally hit the hard bump after the boom of household spending during the pandemic. After a period of moderate performance, late 2023 onward saw a significant decline in household spend, plummeting by over 20% in some months of 2024.
Analysts expect that this sector is likely to remain weak as consumers put off home improvements and instead opt for smaller investments.
Salons and spas
Brits seem happier to buy hair products than a haircut this year. After a strong 2022 and early 2023, the sector has undergone a clear downward trend in the latter half of 2023 and into 2024.
Analysts say this could be a result of inflation, with consumers cutting back on luxury services, and it’s likely to follow us into 2025 with shoppers looking for ways to cut back on their discretionary spending.
At-home entertainment
Another pandemic boom and bust story surrounds the players within the music and video sector. CACI says there has been a “noticeable decline” in the sector in recent years, but especially in 2023 and 2024, as shoppers cut costs by consolidating their subscriptions and pull back on some of the memberships they took out during lockdowns.
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