Three-quarters of consumers in the UK are spending less this Christmas this year, according to the latest research from Capgemini.

The retail analyst said the slowdown in spending is largely due to ongoing Covid-19 restrictions preventing people from shopping in-store (31%), coupled with a fall in disposable income (21%), and people giving fewer gifts because they’re not able to see as many family members (20%).

The news will come as a huge disappointment to retailers. In Capgemini’s previous Christmas spending update, 45% of retailers had indicated they expected to see sales rise in the run-up to Christmas.

The study said these factors are also influencing what people are spending their money on. Nearly half (48%) of purchases are on essential items, with consumers prioritising clothing (33%), beauty and personal care products (27%) and electrical items (17%).

The figures also suggest shoppers are being particularly prudent, with nearly a third (28%) citing discounts and offers as the most influential factor in their purchasing decision. A further 31% said they are only focusing on buying things they need, 28% admitted they had been persuaded to purchase something they hadn’t planned on because of a discount.

While spending might be down, consumers are embracing new shopping formats. Half have shopped more online this festive season than ever before, while almost a quarter (23%) say they have purchased more locally produced goods than in previous years. And the online shopping trend is set to continue. While more than a quarter of consumers surveyed (28%) had never shopped online before the pandemic, 50% are now more comfortable with this format and 50% say they will shop online more in future.

Post-pandemic

The outlook for in-store shopping is also positive. While the preference for in-store shopping on Black Friday dropped from 39% last year to 28% this year according to Capgemini’s first holiday season survey, findings from the second study, which focuses solely on consumer attitudes, suggest shoppers are missing the in-store experience. 62% of consumers would like to return to their previous shopping habits once the pandemic is over, with 64% stating that they miss shopping in-store.

But consumers don’t want the innovations that retailers introduced during the pandemic to be forgotten. New technologies which were brought in to mitigate the risk of COVID-19, such as contactless payments and self-service kiosks, encouraged 42% of shoppers to venture in-store. Now, almost three in five (59%) want these technologies to remain in the future.

Tim Bridges, global head of consumer goods and retail at Capgemini, said: “2020 has been a year of extraordinary disruption, but we have also seen significant creativity and innovation in retail.

As our previous findings shower, many consumers and retailers swiftly adapted to the preference - or necessity - of presence-free shopping. Ninety-three per cent of retailers took deliberate steps to bolster their online offering and one in five introduced new virtual shopping experiences.

“Physical retail has a long-standing place in the hearts of consumers and our research shows that they will return to stores when they feel it is safe to do so, but the pandemic has also exposed retail to new customers who hadn’t previously shopped online. Whether shopping returns to a version of the old normal or embraces the new, retailers must continue to innovate and evolve to create experiences for consumers that feel safe, convenient and personal - whether online or in-store.”

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