Since 2012, VoucherCodes has produced an annual Christmas report examining consumer shopping habits in the six weeks leading up to Christmas.
This year, in partnership with intelligence provider to retail brands, GlobalData, VoucherCodes continues this analysis, using GlobalData’s expert insights to forecast how consumers will be shopping this Christmas.
In the lead up to Christmas 2020, rapidly changing government restrictions in response to the Covid-19 pandemic led to a Christmas unlike any other on record. Nationwide lockdown measures introduced in December prevented socialising outside of households, and retailers were forced to close their doors during the peak Christmas shopping period.
With this Christmas expected to be free from government restrictions, this report analyses how last year’s muted Christmas will impact consumer shopping behaviours during 2021’s festive period, as well as how the Covid-19 pandemic and resulting economic issues will continue to influence shopper behaviours and retail performance.
With a key focus on dates including Black Friday, Cyber Monday and the January Sales, this report analyses the festive shopping prospects for retailers and consumers in seven Western European countries: Belgium, France, Germany, Italy, The Netherlands, Spain and the UK. Christmas spending in this report is defined as retail spending during the six weeks between the middle of November and the end of December.
Christmas retail spending forecast 2021
How are people feeling about Christmas this year?
Christmas 2021 is set to look very different to Christmas 2020. Thanks to the vaccine rollout, Covid restrictions have been largely lifted since July and consumers have begun adjusting to life after lockdown. Whilst the pandemic is very much still present in the UK, at the time of publishing, it is unlikely that government restrictions will be reintroduced this Christmas, and therefore consumers are looking forward to the first ‘normal’ Christmas since 2019.
As a result, people in the UK are feeling more excited for this Christmas than the last and there is a strong sense of wanting to make up for last Christmas this year. When surveyed, 66% of UK consumers said that they want this Christmas to feel more special than Christmas 2020. An additional 44% said they want to make this Christmas a real family event to make up for the isolation of lockdown and a further 42% admitted that they were likely to spend more on Christmas gifts this year than last to ensure that happens.
However, whilst the UK has moved away from the worst of the pandemic, macroeconomic issues resulting from the pandemic have caused increasing concern in the latter part of 2021, with financial worries having the potential to impact spending behaviours this festive period.
Consumer finances are under pressure; unemployment and inflation are both rising and, at the same time, looming increases in National Insurance and further energy price hikes are likely to have a further impact on the cost of living in 2022. In addition to these wider financial concerns, supply chain issues have caused delays and price rises that threaten to continue into the festive period. These factors, coupled with the increasing costs of living as people get back to living a more normal life, mean that on average consumers feel that they are slightly financially worse off than during Christmas 2020.
With consumers feeling stretched financially whilst also wanting to make this Christmas extra special, many admit to being more inclined to rely on loans than their earnings to finance Christmas gift spending this year. In 2020, consumers expected to finance 75% of their Christmas gift spending via their earnings, this is compared to 62% in 2021. In contrast, this year people anticipate relying on credit cards, store cards, loans, and payday loans more than in 2020.
Total retail sales
Figures 1 & 2 show total retail spending from mid-November to the end of December 2019 & 2020 for all seven European countries, and the forecast for 2021. These figures are for total retail sales, comprised of physical stores (bricks and mortar) and online shopping (including mCommerce - sales made through smartphones and tablets).
After an incredibly difficult Christmas for retail in 2020, in which retail sales fell by 4.1% year-on-year, UK retail sales over the Christmas period are expected to rise by 6.3% from £79.7bn in 2020 to £84.71bn in 2021 - a YoY increase of £5.01bn. Sales are expected to recover beyond pre-pandemic levels, with this year’s forecast up 1.9% on 2019’s £83.13bn - equivalent to £1.58bn.
Looking at 2021’s total retail sales for all seven European countries combined, sales are set to rise by 4.7% compared to 2020, taking retailer profits from £293.71bn to £307.43bn - a rise of £13.72bn. Much like in the UK, the seven countries combined are also set to see sales outperform pre-pandemic 2019 Christmas sales. The forecast estimates a 0.9% growth between 2019 and 2021, equivalent to £2.88bn. Of the seven countries, all except The Netherlands are forecast to see sales increases during this festive period, with the UK, Germany and Spain expected to see the largest growth. This will no doubt come as a relief for all nations, in particular Spain who suffered dramatically during Christmas 2020 thanks to a weak economy hit hard by lockdowns in major cities such as Madrid, and a lack of tourism for much of the pandemic.
Figure 1: Total online & in-store Christmas retail sales by country 2019 - 2021: 2019 & 2020 actuals, 2021 forecast
Figure 2: Total online & in-store Christmas retail sales by country (£ billions) 2019 - 2021: 2019 & 2020 actuals, 2021 forecast
Online & offline retailing this Christmas
Where do consumers think they’ll be shopping this Christmas?
Since the outbreak of Covid-19, online shopping has boomed in the UK. This is mostly due to long periods of lockdown forcing non-essential retail stores to close for large portions of 2020 and the start of 2021. These closures meant that shoppers in the UK - even those initially reluctant to shop online - had to buy more of their goods online than ever before.
Since the re-opening of physical stores in April 2021, whilst many have returned to a mix of shopping online and in-store, most consumers have become more accustomed to shopping online than pre-pandemic. Over a quarter of consumers (26%) state they shop online more than they did before Covid, even though stores are now open.
As well as the speed and convenience of online shopping, another huge driver of its success since stores reopened is persisting anxiety around Covid-19 and the safety of returning to crowded spaces. Despite Covid cases and hospitalisations falling, when surveyed, 55% of consumers responded “no” when asked if they were looking forward to visiting shops in the run-up to Christmas. Of this majority, a third (33%) admitted their main cause for concern is the risk of catching Covid-19 from other shoppers. A further 42% also admitted they prefer to shop online, and 58% said they want to avoid crowds in shops near Christmas.
As a result, on average, consumers expect over half of their Christmas shopping to be done online this year, as they feel more confident than ever using this channel (54%). Compared to 2020, the majority of people say they’ll buy the same proportion of their Christmas shopping online (61%), whilst just under one fifth will spend less online than last year, as they’ll be taking advantage of being able to visit stores again (19%).
For those anticipating doing at least some of their Christmas shopping in physical stores, high streets are set to be the busiest locations for Christmas shoppers, with 48% of people predicting they’ll head to high street stores to grab Christmas shopping. This is followed by shopping centres/malls (39%) and retail parks (32%).
For the hospitality and leisure industries Christmas is also a key time, as customers visit venues to socialise and make the most of the festive season. In the run-up to Christmas, cafes and restaurants are set to be the most popular locations, with 33% of consumers anticipating at least one visit, followed by pubs (28%) and beauty salons/hairdressers (21%). In contrast, less popular pursuits will include the cinema (15%), gym (8%) and museums/galleries (7%).
UK online and offline spending
Figure 3 breaks down the total retail sales from figure 1 into online and offline sales.
During the 2021 Christmas period, UK retail sales are forecast to comprise:
- £32.26bn via online
- £52.45bn via offline (physical stores)
Online retail sales this Christmas are set to fall by 8.5% (to £32.62bn) compared to 2020, in which they hit a record £35.26bn as a result of the pandemic. Understandably, as consumers look forward to a Christmas without lockdown restrictions, they will be able to visit stores whenever they wish during the lead up to Christmas, unlike in 2020, and this will shift the balance in favour of physical stores. Despite this shift, 2021’s online spend is still expected to dramatically outperform that of 2019, when it hit £22.28bn. This is thanks to consumers having adapted to shopping online throughout the pandemic, in addition to lingering Covid-19 safety concerns and anxieties around being in large crowds preventing some consumers from returning to in-store shopping.
Figure 3: UK online and offline spending: 2019 & 2020 actuals and 2021 forecast
Figure 4 splits the forecast for online and offline spending this Christmas by share of spend. In 2021, online spending is expected to account for 38% of total UK retail sales, whilst offline sales will make up 62%. Whilst this has shifted in favour of bricks and mortar stores compared to 2020, during which online sales made up 56% of total sales, the shift is minimal when comparing these figures to 2019, before the pandemic. In 2019, online sales made up just 27% of the total Christmas sales, with offline taking the vast majority at 73%. As the UK prepares for a more normal Christmas, it's clear that Covid’s impact on the way we shop extends far beyond lockdown, and these forecasts show that the shift to online shopping has been dramatically accelerated as a result of the pandemic.
Figure 4: UK online and offline spending by share: 2019 & 2020 actuals and 2021 forecast
Christmas spending by region
Figures 5 & 6 show Christmas spending by UK region and the UK nations with delegated powers (Wales, Scotland and Northern Ireland). As in 2020, the regions forecast to spend the most in preparation for Christmas 2021 are London (£15.6bn) and the South East (£13.4bn), both of which are forecast to outspend the other regions by a considerable margin. On the other end of the scale are Northern Ireland (£2bn), and the North East (£2.6bn).
Figure 5: UK regional Christmas spending: 2020 actuals and 2021 forecast
There is a similar pattern when looking at the forecast spend per head for this period. Londoners are set to spend an average of £1,745.61 each preparing for Christmas - the highest of any region - followed by those living in the South East (£1,468.99). Both of these regions are set to spend well above the average UK spend per head (£1,275.06). The only other region forecast to spend more than the UK average is the East of England (£1,341.25).
Figure 6: UK regional Christmas spending: 2020 actuals and 2021 forecast.
Figure 7 looks at the YoY growth in Christmas spending by region between 2020 and 2021. The regions set for the biggest YoY spending increases include the North West, forecast to spend 10.5% more this festive period (£8.4bn) than in 2020 (£7.6bn), and the West Midlands and Scotland - both set for 9.5% increases in spend. These are also the only regions with a spend increase that is forecast to outperform the UK average rate of growth (6.3%). These figures suggest that, of all the areas across the UK, the North West, West Midlands, and Scotland are the most keen to make up for last Christmas by upping their spend on preparations for 2021.
Despite London being forecast to spend the most of any region in 2021, YoY spending growth is marginal by comparison at 4.6%. Growth in spend YoY is most muted in the South West and North East at 3.1%.
Figure 7: YoY growth in Christmas sales by UK region (%): 2020 - 2021 forecast.
Christmas spending on gifts
Figure 8 breaks down the average UK Christmas spend on gifts from 2019 - 2020 and forecasts the 2021 spend. In total, the UK is expected to spend £12.44bn on gifts alone this Christmas, a rise of 6% - equivalent to £0.71bn - compared to 2020 (£11.73bn). However, despite this significant increase, gift spending will still fall short of 2019’s spend (£13.67bn). Financial concerns brought about by the pandemic, rising taxes and energy prices, and expected product shortages brought about by supply chain issues are anticipated to be the key reasons for 2021’s spend on gifts falling below the 2019 total.
Of the Christmas gifting categories, UK consumers are set to spend the most on consumer electronics (£2.7bn), toys (£2.34bn) and clothing and footwear (£2.06bn). Clothing and footwear retailers are set to see the most significant YoY boost in sales at 44%, this is mainly a result of the pandemic hitting this sector hard during Christmas 2020; lockdown shifted consumer priorities away from fashion, resulting in Christmas spend falling by 50% YoY. In reality, the sector is still recovering from the pandemic, as spend on clothing and footwear is still expected to fall shy of 2019’s total (£2.86bn).
Figure 8: Average UK spend on Christmas gifts: 2019 & 2020 actuals & 2021 forecast
Figures 9 and 10 show the average spend per head on gifts from 2019 - 2020 and the 2021 forecasts. When looking at the average UK spend per head on Christmas gifts, the forecast tells a similar story. Consumer electronics are set to account for the highest spend per head (£50.92), followed by toys (£44.07), and clothing and footwear (£38.79). Once again, the clothing and footwear category accounts for the highest YoY growth at 44%, dramatically higher than any other sector, but this is again a result of the huge fall between 2019 and 2020. Spend on gifts is up YoY for all but three categories, those expecting YoY losses are books and entertainment (-3%), money, gift cards and vouchers (-1%) and toys (-1%), however these decreases are very marginal.
Figure 9: Average UK spend per head on Christmas gifts: 2019 & 2020 actuals & 2021 forecast
It’s evident that Covid will have a long-lasting negative impact on spending across several of the gifting categories. Despite some recovery this year, many will struggle to reach pre-pandemic levels of spend. The only categories set to see an increase in spending from 2019 are consumer electronics, alcohol and confectionery, and jewellery - although each of them by a relatively small margin.
The gifting categories most impacted by Covid according to these figures include clothing and footwear which, despite making leaps to repair the damage in sales caused by Covid during Christmas 2020, has a significant way to go to match 2019’s sales figures. Toys and money given as cash gifts, gift cards and vouchers have all been steadily declining in terms of spend over the past few years, and this has accelerated since the pandemic began.
Figure 10: UK average spend per head on gifts: 2019 & 2020 actuals and 2021 forecast
Christmas mCommerce Spend
Penetration of mCommerce devices
Over recent years the way consumers shop online has rapidly changed, with smartphones steadily rising in popularity thanks to advances in technology, the growth in mobile ownership and increased speed of phone signals and WiFi. Unlike when first launched, smartphones are now generally cheaper than many laptops, PCs and tablets, making them an accessible option for many people in the UK, something that is particularly true after two years’ worth of financial uncertainty caused by Covid.
Figure 11 shows the percentage of smartphone users in 2020 compared to 2021. In 2021, 84.6% of the population are smartphone users, a rise of 1.7% versus 2020. In contrast, tablet use has slightly decreased YoY with 73% of 2021’s population owning and using tablets - a fall of 0.5% versus 2020.
Figure 11: Penetration by mobile device among UK Christmas shoppers, 2020 - 2021
mCommerce: Christmas spending by device
Looking ahead to Christmas 2021, spend is set to fall across all devices YoY as non-essential retail stores are expected to remain open as usual across the whole period, unlike in 2020. Figure 12 shows a breakdown of online sales by device. As usual, PCs are set to account for the largest online spend this Christmas at £12.48bn, followed by smartphones (£12.16bn) and tablets (£7.61bn).
Whilst PC remains the UK’s favourite choice for online shopping, sales made via PCs are set to fall by -5.3% compared to 2020, as post-lockdown behaviour shifts take effect.
When comparing mobile devices (smartphones and tablets combined) with PCs, mobile continues to prove the more popular choice for online shopping, forecast to account for a total spend of £19.78bn in 2021 versus £12.48bn for PCs.
Figure 12: UK online Christmas shopping by device: 2019 & 2020 actuals & 2021 forecast
The clearest evidence of Covid’s impact on mCommerce is found when looking at the share of sales expected to be made on each device this Christmas, displayed in Figure 13. Smartphones are forecast to account for a greater share of Christmas shopping in 2021 than 2020, growing 0.9% YoY to 37.7%, which is also up 3.3% on pre-pandemic levels in 2019.
Part of the reason for this growth lies in the investment from retailers in making their websites easier to use by optimising browser and shopping functionalities. Additionally, as consumers get back to a more normal lifestyle, people are once again becoming more on-the-go, therefore the need for mobile shopping will naturally increase as people shop from outside the home. Online retailers have naturally responded to these demands over previous years, but those most likely to have a successful Christmas 2021 will be the ones who have continued to invest in mobile shopping - even during the worst of the pandemic when customers increasingly shopped via desktop over mobile.
Figure 13: UK online Christmas shopping by device, share: 2019 & 2020 actuals & 2021 forecast
About this report
This independent report into retail spending during the Christmas period 2020 has been commissioned by VoucherCodes.co.uk.
The research, 2021 predictions and final report have been prepared by GlobalData.
GlobalData Retail provides clients with comprehensive data and insight on retailers, markets and consumers globally, helping them to sustain competitive advantage in a rapidly changing retail environment.
Data from prior to 2021 was carried out and supplied by The Centre for Retail Research.
