Shopping: Non-food spending falls but the online future looks promising

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The Independent Online

Britons will spend more than £81bn in the run-up to Christmas this year. But that total is a fall of more than £535m from what the country spent in 2008. According to one research house, this is the first time ever that fourth-quarter spending – which includes the key Christmas trading period – has fallen in cash terms.

Verdict, a market research company, says that the total fall in fourth-quarter spending of 0.7 per cent hides an even less pleasant outlook for some retailers, as the overall figures are flattered by a food and grocery market that is expected to grow by 2.3 per cent. Remove food, and Verdict expects to see a 2.5 per cent fall in spending, dropping from £50.8bn in 2008 to £49.6bn this year.

But there are some signs of hope. Another forecast, for the six weeks to the end of December, carried out by the Centre for Retail Research for online shopping site Kelkoo, predicts that Christmas sales for 2009 will finish £832m higher than in 2008.

The widely respected British Retail Consortium-KPMG Retail Sales Monitor for November found that UK retail sales were 1.8 per cent higher than November 2008, with non-food sales up 16.9 per cent year on year. But a strong October had failed to carry over to more growth last month: month-on-month figures, the BRC says, were flat.

At Verdict, Malcolm Pinkerton, a senior analyst, says there are some exceptional reasons for this year's expected decline.

The failure of a number of retailers – including Zavvi, Woolworths and Adams – has reduced capacity in the market, and other retailers have not yet taken up all the slack. The VAT cut, due to be reversed next month, and heavy discounting by retailers have also affected overall sales numbers.

More worrying still for high street retailers is the public's intention to watch their spending, as well as the continued shift to online retail.

The Centre for Retail Research predicts that the UK will see its first "digital Christmas" in 2015, when more than 50 per cent of seasonal spending will be online. Verdict expects Britons to spend £6.8bn online this Christmas, up £837m on 2008, and the equivalent to £132 per person.

Across all sectors, though, Verdict says that one-third of Britons expect to spend less this year than last. Fewer than one in five expect to spend more.

Some areas of the market remain especially depressed: home improvements and furnishings are being held back by a poor property market, and sales of larger electrical and electronics items have suffered as the weak pound has driven up the price of imported goods.

Last year's figures were also buoyed by strong demand for games consoles – such as Sony's PS3 and the Wii – and games, but this year has not seen such significant launches.

The lack of a "must have" gadget is depressing sales, Mr Pinkerton says; the arrival of a new Apple iPhone would have been top of many retailers' wish lists for this Christmas. None the less, December remains the key sales period for retailers, and when many chains make most of their profits.

"If you look at non-food spending, 30 per cent is in the final quarter, although not all of that is due to Christmas," says Mr Pinkerton. "Sectors such as electricals will be the biggest losers, and online will be the star performer."