While retailers can usually count on Black Friday as one of their busiest days to boost sales figures, this year saw sales volumes drop by 0.4% in November. Purse strings inevitably continue to be tightened as the cost of living crisis persists and households adjust to rising prices, but it is perhaps surprising that this year online sales were the weakest link. Data from the Office of National Statistics (ONS) showed that sales volumes for non-store (i.e. online) retailing fell 2.8% in November, “continuing a downward trend since early 2021” when shops began reopening their doors following the pandemic.
This year shoppers generally appeared to be more cautious, having been warned that most Black Friday offers are not actually cheaper. Consumer group Which? reported the alarming reality that, following analysis of more than 200 offers last Black Friday, 98% of products were in fact the same price or cheaper at other times in the year.
But it is not all doom and gloom. While bargain hunters shunned online deals and home deliveries, footfall across all retail destinations was up 9.2% on last year - albeit still lower than Black Friday in 2019 - as consumers returned to the shops. Some online retailers also rose above the rest, with John Lewis reporting that shoppers ordered.
Was it a Merry Christmas?
Christmas trading was even brighter, and turned out better than expected for retailers. According to data by the BDO High Street Sales Tracker, last minute shopping in the week leading up to Christmas Day, including on Christmas Eve (which conveniently fell on a Saturday this year) helped fuel the largest growth in sales since April 2022.
As with Black Friday, the biggest contributor was in-store sales, perhaps a consequence of consumers being advised by retailers not to rely on online deliveries due to postal strikes during the key shopping period. Online stores therefore struggled; online-only fast fashion retailer Boohoo saw revenues decline over Christmas as it failed to contend with the high street.
Other retailers benefitted and a number of household brands and retail chains reported success stories after Christmas. Marks and Spencer delivered an "outstanding performance" and announced its plans in early 2023 to open 20 new stores, creating more than 3,400 jobs. Next similarly reported a 4.8% rise in full price sales year on year in the nine weeks to 30 December 2022, and fashion retailer Reiss saw a 20.3% rise in total revenue over the nine weeks to 7 January 2023. But Silvia Rindone, UK and Ireland retail strategy leader at EY warned that “sales growth has been driven by customers spending more due to inflation rather than buying more”. ONS statistics published on 20 January support this. Although the value of retail sales was up 3.8% compared with December 2021, their volume was down 5.8% on the same period.
Buoyant Boxing Day
Notwithstanding the waning prominence of Boxing Day sales in the retail calendar, the number of shoppers flocking to the shops rose sharply on 26 December compared to last year, when Covid kept consumers at home. Footfall was up by 50.1% on 2021 by 12pm on Boxing Day, spiking at 44.1% on high streets, 40.4% in shopping centres and 25.9% in retail parks across the day as a whole, according to retail analysis firm Springboard.
The number of people heading out to shops the day after Boxing Day also beat the traditional Boxing Day sales by nearly 40%, demonstrating that 27 December is, in fact, a busier day for retail destinations. Interestingly, while the rise in footfall across both days occurred despite the travel disruption and rail strikes, the overall results for the post-Christmas sales period are still well below pre-pandemic levels.
Hope for the highstreets?
While it seems that high streets recovered during the 2022 festive shopping season, it is still unclear how they will fare in 2023 and beyond. Indeed, it is difficult to reconcile the thriving Christmas footfall figures with the number of 2022 store closures. It is reported that more than 17,000 sites closed - the highest number for 5 years and nearly 50% higher than in 2021- equating to almost 50 shops a week. What is clear is that, with the UK set to enter recession this year, a challenging 2023 lies ahead for retailers.
The rise of resale and sustainability
2023 looks set to see a continued rise in the luxury resale market. Rolex has recently launched its programme for certified pre-owned watches, the company’s first foray into resale. Ebay has also returned for a second year as the official sponsor of winter Love Island which started on 16 January, where contestants will wear pre-owned items.
This continues the trend of large luxury retailers such as LVMH, investing in resale platforms with the company launching its resale website Heristoria.com, that is dedicated to items in its archive. The drive for sustainability and break-up with fast fashion looks set to continue this year.
Luxury to leap forward
The Business of Fashion and McKinsey have published their annual report on the global fashion industry. In The State of Fashion 2023 they predict that, although 2023 will see declining growth rates in the luxury sector, growth will still continue at a rate between 5% and 10%. A study by Bain & Company also predicts that the luxury market will continue to grow from next year until 2030, with a growth rate in personal luxury goods between 3% to 8%, as the luxury market remains better equipped to deal with economic turbulence. Much of next year’s growth depends on various factors, including China’s reopening and the strength of the US market. Inflation will affect costs and reduce consumer demand, and macroeconomic and political conditions will continue to disrupt business operations.
The luxury market is, however, predicted to outperform the rest of the industry, as wealthy consumers remain more insulated from economic conditions. The wealthiest 2% of global customers account for 40% of luxury spending, which looks set to remain strong against an uncertain economic backdrop. However, 'aspirational' luxury buyers using discretionary income are more likely to cut back. As a result, 2023 might see a shift in who is buying luxury items, as middle-income consumers are under more pressure amid a looming recession.
Luxury-obsessed younger generations
Millennials and Gen Z accounted for the entire growth of the luxury market in 2022, with many buying luxury items earlier than previous generations. Alpha, the next generation born from 2010 onwards, will also be a focus, with young teens now making their first luxury purchases from age 13. Younger generations will continue to be important consumers as it is predicted that their spending will grow. However, millennials are considered less brand loyal so it will be important for retailers to position their brands accordingly.
A bumpy road lies ahead
Despite a relatively strong trajectory predicted for the luxury retail sector, The State of Fashion 2023 report confirms that “the outlook for the global fashion industry in 2023 is uncertain and tenuous.” Retailers should therefore carefully plan for uncertainties and risks in the year ahead. Consumers will undoubtedly be affected differently by economic conditions, and brands may have to work harder to attract and retain customers against the rising cost of living – particularly those not at the top end of the market.
Earlier this month, Bernard Arnault of LVMH announced that his daughter, Delphine Arnault, would take over from Pietro Beccari to lead the LVMH group’s second largest brand, Dior. The move comes during an operational reshuffle at the group’s largest brands with chairman and chief executive Michael Burke of Louis Vuitton, who has widely been credited with turning the luxury handbag brand into a global superbrand - which accounts for almost two-thirds of the group’s annual operating profit- exiting for an executive role within LVMH.
Delphine Arnault has worked within the LVMH group since 2000, and most recently acted as executive vice president at Louis Vuitton. Her siblings are also closely involved with the business. Alexandre Arnault runs recent acquisition Tiffany, Frederic Arnault is chief executive of Tag Heuer, Jean Arnault is in charge of Louis Vuitton’s watch division, with the eldest sibling running the family holding company.
The management shakeup was closely followed by LVMH shares rising to a record high on 17 January, giving the LVMH group a market capitalisation of €400 billion for the first time ever, and making it Europe’s most valuable company.
Zero-Covid policies in China have impacted luxury brands elsewhere, with Burberry and Richemont both recording revenues under forecasts (despite marginal growth), and accounting this to a drop in sales to Chinese consumers.
Swedish fashion retailer, H&M has removed merchandise lines featuring Justin Bieber lyrics and imagery after the pop singer posted on his Instagram stories that the use of his brand was “not approved” and was “trash”. The singer also urged his 273 million Instagram followers not to buy the merchandise.
H&M has been working with Bieber since 2016, but removed the merchandise after his comments and later released a statement stating that it had “all the right contracts in place” and had followed “proper approval procedures” for licensing. H&M is the world’s second-biggest fashion retailer and recently surpassed net quarterly sale forecasts, up 10% to $6.13billion (62.5billion Swedish crowns) from Q3.
It is also not the first time that pop stars have become involved in disputes with retailers for selling clothing with their branding and imagery on it either. In 2015, Rihanna successfully sued Topshop for £3.3m after it sold a T-Shirt with her photo on it. More recently in 2019, Ariana Grande claimed Forever 21 used a look-alike model and her brand image for use on its clothing. However, the action was stayed due to Forever 21’s bankruptcy proceedings in late 2019.
+44 (0)20 7753 7521
+44 (0)1865 813623
+44 (0)20 7753 7868
+44 (0)20 7753 7747