Opinion: Christmas may be over, but challenges lie ahead

Yet, despite the trepidation, it gifted the industry with a much-needed strong finish to a bumpy year, according to the BRC’s new figures. But what does this really mean for British retail and how do things look for the year ahead?

December is the most crucial, and unique, trading period of the year. With sales across 2016 growing more slowly than in the previous year, it was all to play for in the final month.

Exceeding expectations

Despite the slow start to the trading period, Christmas week was a bumper one and it certainly exceeded expectations. This was welcome news as the wider trend saw total growth for 2016 slow to 1.2 per cent from the 1.8 per cent achieved in 2015.

Sales at the beginning of the festive period were sluggish, though, with shoppers holding out until the week leading up to Christmas for their spending sprees. Christmas week drove the majority of sales for the month, helped by a late Christmas Day, and food and drink driving the bulk of growth.

However, Christmas week aside, there will be bumps ahead in 2017 as retailers face a perfect storm. With a weak pound, input costs are rising and retailers also face the introduction of the Apprenticeship Levy, another National Living Wage uplift and business rates increases.

This is against the backdrop of political and economic uncertainty, slow growth and the need to invest in digital and customer experience to respond to changes in the way people shop.

With the subsequent squeeze on household disposable incomes, consumer spending – the biggest driver of economic growth since the financial crisis – will inevitably take a hit.

Retailers have always shown capability to absorb cost pressures, find efficiencies and take cost out of the supply chain. But, looking ahead, there are serious question marks over their ability to continue to do so.

Stiff competition and market disruption have kept prices down, greatly benefiting ordinary shoppers. The signs point to an end to this sustained, nearly four-year, period of deflation and a trend of shop prices starting to rise.

With the subsequent squeeze on household disposable incomes, consumer spending – the biggest driver of economic growth since the financial crisis – will inevitably take a hit.

Consumer confidence

We, the BRC, are encouraging policies that help retailers keep prices down for consumers, provide confidence to the market and add no further pressure to disposable incomes.

Our top priority is ensuring consumers are at the heart of forthcoming Brexit negotiations to ensure cost burdens are not exacerbated. In particular, this means no new tariffs on imports, particularly on food, where cost implications would be highest.

More twists and turns lie ahead in 2017. The outlook is tough and the challenge for retailers is to create growth against a backdrop of increasing inflationary pressures and unprecedented economic and political uncertainty. 

Indeed, it will be the resilience, enterprise and forward-thinking of British retailers, and policies that help keep prices down, that will see the sector through the year ahead.