UK retailers brace for challenging holiday season

A recent study by Fiverr International Ltd. reveals a stark disconnect between UK retailers' expectations and consumer spending intentions for the upcoming holiday season. The survey, conducted in partnership with Censuswide, polled 500 UK consumers and 500 small-to-medium business leaders, offering insights into the strategies retailers are adopting to navigate an uncertain economic landscape.

Aggressive discounting amid economic pressures

In a significant shift from previous years, an overwhelming 85 percent of UK retailers plan to offer steeper festive discounts this year, compared to just 54 percent in 2023 and 57 percent in 2022. This aggressive pricing strategy comes as retailers grapple with inflation and competition from e-commerce giants, with 49 percent of respondents citing these as their primary challenges.

Despite 70 percent of UK retailers anticipating increased sales compared to last year, only 23 percent of British consumers plan to increase their holiday spending. This disparity underscores the ongoing impact of the cost-of-living crisis, with a third of shoppers prioritising value for money in their purchasing decisions.

Generational spending divide

The survey highlights a significant generational gap in spending intentions. While 40 percent of 16-24-year-olds plan to increase their holiday expenditure, this figure drops to 21 percent for those aged 45-54, and plummets to just 8 percent for the over-55 demographic.

Technological adoption and consumer preferences

UK retailers are increasingly turning to artificial intelligence (AI) to streamline operations and enhance customer experiences. A substantial 69 percent of surveyed retailers plan to invest in AI this year, with 31 percent intending to integrate AI throughout their entire customer journey. However, this enthusiasm for AI is not mirrored by consumers, with 73 percent of Brits stating they do not use AI for Christmas shopping.

The data also reveals a potential misalignment in retail strategy. While Google search (37 percent) and in-store shopping (31 percent) are the top methods consumers plan to use for holiday purchases, over 22 percent of retailers indicate they will reduce investment in in-store promotional activities.

Adapting to market pressures

As economic headwinds persist, only 17 percent of SMEs surveyed plan to maintain current investment levels, down from 31 percent in the previous year. Digital marketing tools, particularly social media advertising, remain a top investment priority for the third consecutive year.

To manage the seasonal surge, 61 percent of retailers plan to hire temporary workers, while 31 percent will continue to rely on freelance support, a trend consistent with the previous year.

Bukki Adedapo, Fiverr International Expansion Lead, commented on the findings: "As we approach peak shopping season, retailers will not only need to overcome ongoing macro-economic obstacles but also tailor their approach to changes in consumer behaviour. The cost of living crunch continues to impact both shoppers and retailers, so being smart with investment will be crucial in the coming months."