British retail sales volumes continued to fall in October, serving as another warning sign for the economy as the U.K. teeters on the brink of a recession.
“Brands have been feeling this softness in sales over the last couple of months, and we have all become very used to seeing continued ad-hoc promotions as businesses try to re-balance their excess inventory and revenue forecasts,” said Rebecca Bingley, retail expert and co-founder of London advisory agency Studio Three. “We saw retailers and brands across the board predict a bounce back of demand in 2023, which hasn’t materialized. In 2024, they need to take stock, literally, and pay close attention to their stock forecasting.”
U.K. brands have struggled with a variety of issues over the last year, including a lack of tourism, the void of VAT-free shopping and the ongoing cost of living crisis. The same challenges are set to remain through the first quarter of 2024. October retail sales volumes dropped 0.3% month-over-month, following a 1.1% decline in September, according to November 17 data from the Office for National Statistics.
While some companies, like high-street retailers Marks & Spencer and Jigsaw have reported lifts in sales, they’re exceptions to the rule. As such, many companies are working to rightsize their stock and restructure their teams.
Refocusing on quality has proven effective for mid-tier brands, with many luxury consumers newly trading down. “People who previously [shopped] the lower end of what is on offer at Net-a-Porter or Matches are seeing the design and quality coming through from brands like Jigsaw and M&S,” said Bingley. “They’re now buying into the top end of the high street, rather than going up into the bottom end of luxury.”
Heading into the holidays, brands will be working harder to gain shoppers’ attention. In November 16 research by consulting company PwC, 44% of people surveyed said they were interested in Black Friday sales this year — 66% said the same last year.
“Brands are trying to differentiate themselves through their promotions,” said Bingley. Dr Barbara Sturm, for one, gamified its Black Friday promotions, offering the chance to win a “mystery edit” of products alongside its more typical offers. Meanwhile, online retailer GOAT expanded its Black Friday event with auctions, drops and trivia.
What about luxury?
For luxury footwear brand Malone Souliers, the current climate is more challenging than in previous years due to factors including the decline of tourism spend. The brand does not disclose its revenue. “The [loss of] tax-free shopping has greatly impacted how consumers shop [in the U.K.]. It’s also affected London’s [status] as one of the top fashion cities, as people can easily take flights or the Eurostar and spend in Europe,” which offers tax-free shopping, said a brand spokesperson.
For brands with stores in multiple markets, London is slipping down on their lists of top tourist shopping locations. For its part, Spanish luxury accessories brand Tissa Fontaneda opened a flagship store in Belgravia in September after operating stores for three years in the U.K. market. It has over fifty boutique stockists worldwide, as well as two flagship stores.
“Our clients from America tend to do a whole trip around Europe, starting with the U.K.,” said Carlota Fontaneda Bamberger, director of Tissa Fontaneda UK. “So they’ll say, ‘I love the product, but I’m going to Madrid next, so I will get the bag there with 20% back for tax-free. This happens a lot for tourists.” Over 70% of Tissa Fontaneda’s customers are tourists, and the brand has largely lost the U.K. as a revenue driver, according to the company. The brand declined to disclose overall sales.
Going into 2024, Fontaneda is updating its approach to stores, including with more in-store events.
According to Malone Souliers, the increase in local living costs has also impacted how consumers spend. “We have seen a shift toward carryover styles rather than seasonal pieces,” said the spokesperson. “People want to maximize their purchases.” As a result, the brand is also focusing on loyalty, with in-store events and a localized marketing strategy.
The forecast doesn’t look promising going into the holiday season. “In November, we have some days where we make more than our target sales, and then for three days, we don’t have any sales,” said Fontaneda Bamberger. According to a retail consultant who works with multi-brand stores in the U.K., the season’s sales have so far been patchy, and overall sales have been down.