Sales in retail stores see an uptick due to warm weather as they approach the crucial fourth quarter of the year
The retail sector is gearing up for the festive season, with hopes of a bigger boost to counteract the cooling labour market and weak consumer confidence. According to Matt Dalton, consumer sector leader at Forvis Mazars, consumers are becoming more selective in their spending due to economic uncertainty.
Matt Dalton's sentiments are echoed by Dr Kris Hamer, director of insight at the British Retail Consortium, who warns that even if sales growth continues, it may not be enough to mitigate the costs the industry has faced since last year's Budget. The Budget brought bad news for retail, with a significant increase in employer's National Insurance contributions adding £2bn in costs.
The retail sector has been grappling with low spending, the shift to online shopping, and the ever-growing experience economy. Retail sales fell by 0.1% in the three months to August 2025 compared to the three months to May 2025, according to the Office for National Statistics. This trend continued into July, with sales falling by 1.5%.
Despite these challenges, Deann Evans, managing director, EMEA, at Shopify, believes that the key for retailers is to turn early demand into lasting momentum during the golden quarter. One retail chain hoping for stronger success in this period is Edeka.
However, consumers are not immune to the economic concerns. According to Matt Dalton, consumers are worried about the economic outlook, leading them to be more selective and tactical in their spending. This has resulted in a decline in spending in sectors such as automotive fuel and computer and telecoms equipment stores, partly offset by increases in non-store retailing and clothing stores.
There is some positive news, though. Consumer confidence, particularly in personal finances, appears to be improving. This improvement, coupled with rising real incomes, offers some hope for the retail sector. However, speculation about tax rises casts a shadow over the all-important golden quarter.
In conclusion, the retail sector is facing a challenging period, but there is still hope for a strong festive season. Retailers will need to be strategic and adaptable to turn early demand into lasting momentum, while consumers will need to make tactical decisions about their spending. Only time will tell how the golden quarter of 2025 unfolds.
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