Golden quarter spending is likely to drop compared to last year as the impact of prolonged high inflation takes hold on discretionary spend, according to new data from advertising platform, Cardlytics.
When comparing the run up to the golden quarter this year and 12 months ago, spend across retail between July and early-September has dropped 4%, with the number of transactions also falling by 1%, according to Cardlytics spending data based on 20 million UK bank accounts. This would indicate expected declines for the most important period for retailers after over a year of tighter belts and higher rates of inflation.
Over half of consumers have seen an increase in their retail spend in the past year (58%) with a quarter (26%) planning to cut back on Christmas presents for friends and family as a result of rising costs.
To manage these higher prices, more than one in four (28%) UK adults are using more loyalty and reward schemes and looking for more discount codes online (26%) before making a purchase. A further quarter (25%) admit to switching to cheaper brands for clothing and homeware.
Consumers are cutting back on non-essentials like fashion purchases, which have seen spend fall 11% year-on-year and the number of transactions decline 13% in the same time-period. At the same time, online fast fashion retailers have seen a continued decline – of 29% in spend and 31% in transaction numbers.
Traditionally bricks and mortar retailers have faced mounting challenges over the past few years as they struggle to get customers through the doors. Spending at department stores fell 18% year on year[1] whilst the number of visits fell 22%.
Luxury retailers are usually less affected during economic downturns however, Cardlytics data indicates that – whilst the number of transactions on high-end labels are up 34% year-on-year – the average transaction value has fallen by 25% and overall spend has almost flatlined at just 1% up. This would suggest that wealthier consumers are still spending with premium fashion brands but they’re spending far less in one go and even choosing cheaper items.
However, some retail categories have benefitted from tighter purse strings. Second-hand marketplaces are still seeing growth with both spend and the number of transactions increasing 6% year on year. As a sustainable and more wallet-friendly alternative, a fifth (20%) of consumers say they have bought more second-hand items and cut back on their designer or luxury brands.
The cost-of-living crisis has also proved that the lipstick theory might be right – that during periods of downturn, make-up sales increase as people look for ways to treat themselves to small items that make them feel more in control of their finances. With the majority of retail categories seeing declines in spending, make-up stores have seen spend increase by 12% and the number of transactions increase 26%.
Dawn Reid, VP of advertising partnerships at Cardlytics, said: “Stores across the board have seen transaction values on the wane and consumers trading down as the cost-of-living crisis continues to take hold. While there are suggestions that consumer confidence is on the up with interest rates freezing, retailers should brace themselves for a tough golden quarter.
“Consumers are increasingly savvy with their spend. This July to September saw a 25% increase in the number of cashback rewards claimed through retail spend – so it’s clear that people will open their wallets if they feel they’re getting a good deal.
“With the high street still under pressure, and competition healthier than ever online, delivering a personalised offer and rewards programme could separate the winners from the losers this Christmas.”
