Retail reduced: January 2023

In our December newsletter, we looked at the trading performance over the pre-Christmas period and found that the rise in inflation had been masking the challenging trading conditions within the retail sector. Christmas and New Year have come and gone, and the results are in.

Unsurprisingly, a similar trend over the Christmas period emerged, with shoppers clearly prioritising value over ‘frivolous’ expenditure. Many retailers reported strong sales, with overall year-on-year sales growth at 6.9%. However, as was the case with November’s Black Friday sales, figures seemed to have been skewed by the high level of inflation. With the ongoing cost-of-living crisis, consumers continued to rein in their spending and sales volumes fell by 5.8% compared to December 2021. According to the Office of National Statistics (“the ONS”), this represents the worst-ever fall since records began in 1997.

That said, there were some ‘winners’ over the festive period. Primark recorded £3 billion worth of sales and value grocery retailers Lidl and Aldi also did very well, attributing approximately £63 million of their trade to have been won from traditional grocers, due to the increased importance of value for consumers.

Although traditional gifts, such as toys, beauty and electricals had a strong Christmas, grocery sales were higher than £12 billion over Christmas, the highest amount on record. Following the emergence of the Omicron variant the previous year, consumers appeared to be keen to splash out on the Christmas dinner this year. In addition, footfall in the shops increased, while online sales dropped from 25.9% in November to 25.4% in December.

With the impact of global warming continuing to be felt, we have taken a look at how some retailers have started 2023 with commitments on sustainability. Several initiatives have been announced already this year and it is expected for this trend to continue as the year goes on.

Starting in the supermarket space, Waitrose intend to replace the majority of their small wine bottles with aluminium cans with a view to saving in the region of 320 tonnes of packaging. Waitrose noted that nearly three million small bottles were bought last year. The benefits of making this change include cutting CO2, due to the significantly lower output generated from aluminium cans compared to glass bottles, and being able to recycle these cans an infinite number of times. M&S Food are trialling paper carrier bags in 10 of their UK stores in a bid to offer a plastic-free alternative. The bags will be able to hold a weight of 15kg and are likely to become standard if the trial proves successful. The trial aims to find the best sustainable carrier bags which benefit both the environment and the customers.

In addition, Currys has announced that it will be extending its in-store recycling incentives to online customers, stating that it has processed 750,000 tonnes of e-waste since 2011. This involved the recycling of 15 million individual technology products. Customers will receive at least £5 worth of in-store credit when they drop off the unwanted items as part of its ‘Cash for Trash’ initiative. Currys stated that, in the last year, it paid out £10.5 million to customers who brought in their electrical items to be recycled. Based on a study by Research Without Barriers, more than 50% of UK shoppers throw away unwanted technology products when they buy new devices, despite 41% saying that they want to be more environmentally aware in 2023.

Lastly, the UK Government is looking to bring in a ban on polluting single-use plastics, including single-use plastic plates, trays, bowls, cutlery, balloon sticks and certain types of polystyrene cups and food containers. The ban will be introduced from October 2023 and will require retailers to rethink their reusable offerings.