In spite of pessimistic predictions, UK retail sales in the fourth quarter of 2006 were consistently ahead of 2005, according to retail analyst Verdict Research, part of the Datamonitor Group.
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However, the analyst added that for many retailers growth had come at the expense of margins, and 2007 is expected to be a much more challenging year.
Despite the mild weather, which was expected to dampen demand for early Christmas shopping and impulse purchases, Verdict reported that sales in October and November rose by 3.6% and 3.7% respectively.
Moreover, in spite of retailers managing expectations with relatively gloomy predictions for Christmas, a sharp late surge was observed in December, with sales up by 3.7%, in spite of a strong comparative with 2005. Verdict expects the final growth figure for the month to come in at 3.9%.
Online retailers benefited from the biggest sales increase, recording a 40% rise in sales in the fourth quarter to GBP3.5bn (US$6.9bn). According to Verdict, food and grocery is now the largest online retail market in the UK.
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By GlobalData“Retailers without transactional websites are losing sales to competitors – and will continue to do so,” said Verdict senior retail analyst Maureen Hinton. “However those with web offers must fulfil their obligations to deliver in time for Christmas – which means managing availability, deliveries and the supporting customer services, seamlessly.”
Another key trend observed during the Christmas period was the success of premium food ranges. Although consumers are price conscious they have been trading up to higher priced products, Verdict said, citing food ranges such as Tesco’s Finest and Co-op’s Truly Irresistible as examples. “By offering good value products at higher price points, retailers can persuade shoppers to spend more per transaction,” Hinton said.
