MRI Software has forecast a challenging Christmas period for retailers as Brits tighten their purse strings in response to rising bills.
The retail intelligence expert (formerly MRI Springboard) has predicted a tough Christmas trading period after its figures for footfall in September revealed the largest month-on-month decline (-3.2%) since January, prompting it to forecast that footfall across all retail destinations will continue to decline for the remainder of 2023.
MRI blames the financial constraints faced by households, high inflation and interest rates for the forecast decline. It said that while interest rates were not raised in September, around half-a-million households are facing the end of their fixed-rate mortgages in early 2024, which means a significant rise in their monthly outgoings.
MRI Software insights director Diane Wehrle said: “With this additional financial burden for so many consumers just over the horizon, MRI Software anticipates that this will curtail consumers’ propensity to shop. It is forecast that spending pressure will start to bite from September onwards, with drops in footfall from month-to-month over the three months from September to November, only increasing from November to December in the run-up to Christmas.
“In each year between 2009 and 2019, footfall dipped in September from August, as a result of a drop in consumer demand following the end of the holiday season and the start of the school term. Both 2020 and 2021 were heavily disrupted by Covid-19 and again in 2022 – but to a lesser degree. However, this year the drop in footfall will be further impacted by the hit on many household budgets due to higher inflation and interest rates.”
MRI Software predicts that declines month-on-month from September to November, dropping below 2022 levels from October onwards. It said that retail parks will continue to be the most resilient destination types, with an uplift over 2022 levels until December, averaging 0.9%.
“Historically, high streets have lost out to the other two key destination types over Black Friday,” said Wehrle, “so we are forecasting that high-street footfall will drop to 2.5% below the October level, but will increase from October to November by 2% in retail parks and by 3% in shopping centres.”
She added: “The largest hit on footfall will be felt by high streets, which is generally the case in the run-up to Christmas as shoppers head to larger shopping centres and retail parks, which lure shoppers through a wide range of brands in large stores in a single destination. Despite this, we are forecasting that the drop in footfall from 2022 will be of a similar magnitude in both high streets and shopping centres in December (-2.5% and -2.6% respectively). However, over the four months from September to December, footfall in shopping centres will average just -0.3% below the 2022 level versus -1.7% in high streets.”
The gap from the 2019 footfall level will widen to -12.5% across all retail destinations from -11% in August. In high streets in August, that gap was wider at -13.4% and -14.8% for shopping centres. MRI Software predicts that gap will widen in December to -15.5% for high streets and -17.7% for shopping centres.
