UK retailers under pressure: plunge in December sales figures point to only one solution

Key findings:

• Retail sales slump 3.2% in December, biggest drop since Jan 2021
• Sales volumes now at lowest ebb since May 2020
• Despite the overall decline, some major retailers like Tesco and Next reported strong Christmas trading

The news today from the Office for National Statistics makes sombre reading for the UK retail sector. Retail sales volumes shrank 3.2% in the period Nov to Dec 2023, from a rise of 1.4% in November. This was the largest monthly fall since Jan 2021 when Covid restrictions had a significant impact on sales.

This was reflected in the online world, although the value spent online versus a year earlier was up 7.7% which indicates the strong shift to online consumer spending is continuing.

What does this mean for retailers, and specifically online sellers?

Although the value of sales is increasing, so too is the competitive intensity in the market. That means efficiency has to improve and the time it takes to respond to market conditions must rapidly decrease.

Let me take the second point first; in a bid that takes milliseconds to complete, modern retailers must decide whether to compete on price for a specific item and also how much to bid to secure a favourable ad position. In the world of AI this can only be done using AI, the volume of data (down to individual SKU level) and the timeframes (fractions of a second) are not areas where humans can compete effectively.

The efficiency point really just builds on this. A mid-sized retailer may need to change bidding thousands of times every day to keep pace with the market; from a practicality perspective this is, again, out of the realm of human capability.

So to conclude; although the December figures are, on the face of it, poor, there is hope for online retail. Consumer spending is moving towards you; but please consider how to stay competitive and garner more than your fair share of the spending; 2024 is the year of AI implementation and I urge you to have this at the top of your agenda.