|PwC’s annual Festive Predictions report published today (Thursday, 1st December 2022), paints a challenging picture for retailers in the critical run-up to Christmas, as consumers say they will rein in their spending on gifts and celebrations this year.
Following the impact of the Omicron variant on the festive season last year, many retailers had hoped for a return to normality in 2022. They also want to see a continuation of the strong momentum from Black Friday, which saw increased shopper interest, particularly amongst under 35 year olds, and an estimated £0.5 billion in additional spending according to PwC’s research last month.
However, consumers are instead planning to reduce their festive spending, with an average spend of £393 per adult – that’s 8% less than last year’s £426, and 4% less than the £412 spent before the pandemic in 2019. The top reasons cited for spending less were because their personal finances have been hit (57%), because they have less money to spend (54%) and because they are less confident about their finances (47%), reflecting the findings of PwC’s latest Consumer Sentiment survey.
David Armstrong, economist and Consulting partner at PwC Northern Ireland, comments:
“With earnings barely keeping up with record inflation on utilities and groceries, it’s no surprise that consumers are telling us they plan to spend less this Christmas. And the fact that spending intentions are negative across every category means that no corner of the high street will be spared.
“Christmas dinner – and food and drink more generally – remain the key spending priorities, with almost as many people saying they will spend more as spend less. But, with record food price inflation, this still suggests that many Christmas dinner tables will see less lavish feasts than in previous years. This will impact NI as 77% of us expect to be spending Christmas attending – or hosting – an extended family gathering, compared to 66% UK wide. There have also been notable declines in priority on fashion and Christmas stocking fillers and treats, suggesting that ‘practical gifting’ will take precedence over frivolous spending in more frugal times.”
Cara Haffey, partner and Private Business leader for PwC Northern Ireland, comments:
“After two years’ of challenging trading due to pandemic lockdowns, tier restrictions and the Omicron variant curtailing festivities, the high street had been hoping for a bounceback this Christmas. But, with the cost-of-living crisis beginning to bite consumers, and overall spending forecast to decline by 8% this year as a result, retailers will instead need to help their customers economise, while keeping Christmas special. At the same time, they will also be trying to attract the one in ten consumers who actually intend to spend more in 2022.
“Our research also shows that, while the pandemic accelerated the shift to online shopping, there’s been a recovery in the preference for shopping in physical stores. So there remains a need for retailers to consider their physical shopping environment to entice shoppers into stores. In NI, consumers are not as likely to shop online as other parts of the UK – 43% of consumers here are planning to shop for Christmas online this year compared to UK average of 54%; and almost half (48%) of NI customers plan to spend in store (48%) this Christmas, compared to 37% UK wide.”