Data: The sectors that will win and lose this Christmas
The cost-of-living crisis is set to bite this festive season, with health and beauty the only sector to see volume growth, Retail Week’s latest report reveals
The Christmas Forecast features exclusive data from forecasting expert Retail Economics on how retail sales will fare this Christmas, along with detailed breakdowns by sector.
The data reveals that retail sales by volume will be down year on year in the final quarter of 2022. However, with inflation currently around 9%, the value of retail sales is predicted to rise.
Food sales by value are expected to be up by 4.7% with sales volumes down by 3.3%, while in non-food those figures are predicted to be up by 2.7% and down by 7.1% respectively.
That will bring total retail sales by value and volume to 3.7% and -5.3% respectively.
The report, produced in association with Elavon, LiveRamp and Zendesk, estimates the proportion of retail sales online in the fourth quarter of 2022 to be 32.3%, which would represent value growth of 8% against the same period in 2021.
The outlook for retail’s biggest sectors
There will be a big peak period ahead for several sectors, though in terms of sales value our report suggests DIY and gardening and electricals will be the two sectors that see a decline. By volume, it is a different story – only health and beauty is expected to see a rise as the inflationary environment eats into people’s spending power.
Retail Week and Retail Economics have forecast Christmas sales performance by category, revealing the product areas in which retailers should be placing their bets.
Food and grocery – investing in lower prices
High levels of inflation are set to drive value growth across food and grocery, with sales predicted to be up by around 4.7% in Q4 2022, compared with one year before, implying a decline in volumes of 2%.
In 2020, the sector benefited from lockdowns that closed many hospitality venues but last year it still performed robustly in a more ‘normal’ trading environment.
The category will also face greater competition from hospitality spending compared with Q4 2021 as many consumers avoided events and gatherings last year after the emergence of the Omicron variant of Covid-19. Overall, this will act as a drag on sales comparisons but there is still a lot at play here.
Faced with rising inflation, consumers are likely to adopt recessionary behaviours to stretch their budgets, which will involve a mix of trading down to cheaper brands, sacrificing perceived quality for lower costs, shopping around and switching to discounters.
Retail Week expects that grocers will continue to invest in lower prices. Iceland and The Food Warehouse, for example, have reduced the cost of products by 10% on Tuesdays for shoppers aged 60-plus, with no minimum spend. Iceland said it was reacting to research from Age UK highlighting that three-quarters of older people in the UK are worried about rising living costs.
Tesco has launched its Better Baskets zones in stores to signpost healthier and more sustainable products at affordable prices, with the majority of the scheme’s products at Clubcard Prices, Low Everyday Prices or part of its Aldi Price Match scheme to help remove prices as a barrier to customers making better choices.
- For more on how grocery is expected to perform, read the full report here
Health and beauty – the category that always bucks the trend
The health and beauty category is known for continuing to perform well during tough economic times as consumers seek more affordable feel-good purchases and this Christmas will be no different.
Overall sales in health and beauty are expected to rise by 4.2% year on year in the final quarter of 2022 with volumes also rising by 0.2% – the only sector where sales volumes are predicted to rise.
Health and beauty will be one of the strongest performing categories in the final quarter for several reasons, not least the continuing shift back to the workplace. The post-pandemic rebound in socialising – therefore making cosmetics an appropriate gifting choice once again this year – is likely to give it a further boost.
Want to find out more?
Access your copy of The Christmas Forecast, produced in association with Elavon, LiveRamp and Zendesk, for free. You will discover:
- Breakdowns on how the homewares, electricals, fashion, toys and games, furniture and flooring, and the DIY and gardening sectors will perform
- How retailers such as the Co-op, Liberty London and Sosandar are preparing for Christmas
- Analysis of the factors influencing consumer spending during peak
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