The Office for National Statistics (ONS) today published retail sales data for December 2024, revealing a further decline in spending during what is traditionally the busiest period for UK retailers. Retail sales volumes dropped by 0.3% compared to November 2024 and were down 1.1% year-on-year when compared to December 2023. This marks the second consecutive month of contraction, highlighting the growing impact of the cost-of-living crisis on household spending.
The ONS data also shows that the final quarter of 2024 failed to deliver the expected boost for retailers, with sales volumes down 2.5% year-on-year. These figures underline the challenges faced by the retail sector as inflation, stagnant wage growth, and higher living costs continue to weigh heavily on consumer behaviour.
Retailers Struggle in the Golden Quarter
Despite December’s calendar of key retail events such as Black Friday, Cyber Monday, and the Christmas shopping season, the “golden quarter” proved disappointing for many businesses. Asif Aziz, Retail Director at EE, said:
“The golden quarter proved unworthy of the name as the sun set on what was a challenging year for the retail industry in 2024. Despite a difficult backdrop, at EE we saw strong demand in-store and online for smart tech as consumers continue to explore how it can improve their everyday lives.”
The ONS report highlights that although some sectors, such as clothing, performed better than others, overall retail volumes fell short of expectations. Clothing sales volumes rose by 4.4% in December, compared to 3.5% in November, suggesting that seasonal demand for winter apparel and gifting helped this category recover slightly. However, these gains were offset by weaker performance in other areas, such as food and non-essential goods.
David Paulding, VP International at Nextiva, commented on the overall softness of the results:
“Christmas hasn’t been the golden goose that retailers had hoped for. While sales promotions tempted some consumers to spend, they failed to lure customers across most categories to spend bigger than last year. There was some success; clothing stores saw sales volumes rise by 4.4% in December, up from 3.5% in November 2024.”
Paulding also pointed to the challenges ahead, noting, “The lacklustre results are a triple negative for retailers as they go into 2025. The softer close to 2024 will be compounded by the growing tax burden levied by the increase in the employer’s national insurance contributions. Add to that, rising customer expectations and brands face a tough 2025. For businesses to stand out, they need great choice, competitive pricing and stellar customer service.”
Economic Pressures and Changing Consumer Behaviour
The broader economic environment continues to play a significant role in shaping retail trends. Inflation remains a persistent issue, with consumers prioritising essential spending on food and energy over discretionary purchases. The ONS data showed that food store sales volumes declined by 0.6% in December, reflecting the pressures faced by households balancing rising prices with limited disposable income.
Rory O’Neill, Chief Marketing Officer at Checkout.com, shared insights from the payments sector, noting that spending habits shifted notably in December:
“December 2024 bucked the usual seasonal trend, as new ONS data reveals a decrease in retail sales volume by 0.3% – a disappointing outcome, despite the inclusion of key shopping events like Black Friday and Cyber Monday. There was a momentary boost to retail sales on 20th December, with Checkout.com data showing last-minute gift shopping drove spending 33% higher than the average daily spend in December 2024.”
O’Neill added, “This downturn further highlights the impact of the cost-of-living crisis, with tighter budgets likely curbing spending this Christmas, with consumers prioritising essential expenses over discretionary purchases.”
Opportunities in In-Person Experiences
While online retail continues to hold a significant share of total sales, accounting for 26.3% of overall retail spending in December, in-person shopping has shown resilience at certain high-performing destinations. Bruce Findlay, Managing Director – Retail at Landsec, said:
“The best places are outperforming national benchmarks, consistently showing resilience despite overlapping macro pressures in the market. Across our portfolio and beyond, consumers are prioritising in-person and shared experiences – and it’s driving footfall and sales performance at best-in-class destinations.”
This suggests that while overall sales volumes may have declined, retailers focusing on customer experience and innovative spaces could find opportunities for growth even in a challenging market.
Outlook for 2025
As retailers look to the year ahead, cautious consumer behaviour is expected to persist. Aziz at EE emphasised the importance of meeting customer needs during this period of uncertainty:
“As we move into 2025, we anticipate continued cautious spending from households in the face of economic uncertainty. Our focus will be to continue delivering exceptional customer service, offering personalised shopping experiences and ensuring we meet the evolving needs of our customers.”
While the pressures of inflation and higher business costs loom large, retailers are being urged to adapt by investing in customer-centric strategies. Those who can provide value, innovation, and convenience are likely to fare better in navigating the economic challenges of 2025.
