UK households set to have £3 billion less to spend this Christmas season as cost-of-living hits hard

UK households are set to be £3 billion worse off this Christmas compared with last (Q4 2023 vs. Q4 2022), according to new research from e-commerce delivery specialists ShipEngine and ShipStation.

This is due to high levels of inflation continuing to erode spending power for many households as the cost-of-living climate drags on. The research was commissioned by their operating company, Auctane, in partnership with retail consultancy, Retail Economics.

Consumer surveys were undertaken by the latter in August and include answers from a sample of more than 8,000 nationally representative consumers. Additionally 2,000+ Auctane customers engaged in online retail were surveyed, across the UK, USA, Canada, Australia, Germany, France, Italy and Spain.

To cope with the ongoing challenge, savvy shoppers intend to start Christmas shopping earlier, use online marketplaces to stretch their budgets and cut back their overall spending. Indeed, UK consumers look set to spend £17.9 billion on online marketplaces this Black Friday and Christmas as they search for the most competitive prices.

Across the eight markets surveyed (UK, US, Germany, France, Spain, Italy, Canada and Australia), the research predicts that online marketplaces will account for almost £202 billion worth of sales over the peak season.

Tom Forbes, SVP Enterprise Revenue at Auctane, says: "Cautious consumers and unpredictable economic conditions won’t dim the Christmas shopping spirit of UK shoppers, who are set to hunt for discounts, deals and value, as they try to get the most bang for their buck this year.”

“After a grey summer in the UK, retailers will look to start promotions earlier than ever, with some already having started, as they look to shift any leftover inventory to make space for seasonal autumn and winter stock.”

“Marketplaces are set to play a huge role at this peak with younger consumers spending more than ever on these platforms, which enable them to easily compare prices from different sources, while offering great choice and flexibility.”

“Looking at delivery, the value of speed must not be underestimated with online shoppers often willingly to pay more for quicker, more convenient deliveries to ensure they get their gifts on time.” 

UK consumers are the most likely to be ‘early bird’ shoppers, with 40% surveyed planning to start their Christmas shopping before October. Looking at this further, 15% of those expecting to shop earlier stated they already started shopping in August.

The research also suggests that retailers will look to jump on this trend, as early shopping becomes the norm. One in four merchants surveyed intend to increase the number of their holiday promotions this year, with the same proportion planning to launch promotions before October.  

The impetus to shop early and benefit from promotions over the holiday season is particularly pronounced among younger shoppers. Across all markets surveyed, 44% of digital natives (consumers under 45) intend to engage in their festive shopping during promotional periods like Black Friday and Cyber Monday. 

Conversely, older shoppers surveyed report being more likely to adopt more traditional approaches to better manage budgets for their festive purchases. These include self-imposed spending limits, trading down to value brands and using cash to help them stick to their budget.

Richard Lim, CEO at Retail Economics, says: “The squeeze on incomes has become a war of attrition for many households who have dwindled down their savings as the cost-of-living crisis drags on.”

“Savvy consumers are using all means necessary to manage their budgets by shifting more of their spending to marketplaces to search for bargains, searching for pre-loved products and starting their festive shopping earlier to spread the cost.”

“Retailers will have to work harder than ever this year to keep prices competitive while catering for more demanding customers who want to shop on and off-line in a manner that suits their needs.”

There is a shift in consumer deliveries priorities and preferences during peak season vs the rest of the year. Earlier in the year, Auctane research highlighted that the cost of delivery was by far the most important factor for consumers.

However, during the peak season, while the cost of delivery remains significant, its influence appears somewhat tempered, with speed becoming equally as crucial - almost 70% of UK consumers highlight the speed of delivery, alongside cost, as the two most important delivery factors.

Yet, less than a third of merchants surveyed plan to offer delivery of two days or less as standard (two days or less). 

The biggest concern for UK consumers when it comes to delivery this peak season are late deliveries, with 42% of consumers highlighting this. Alongside timeliness, there are mounting concerns around missing and stolen parcels, with 41% of UK consumers identifying this as an issue. 

Looking at willingness to pay for delivery, our survey discovered that over half of UK consumers report being open to paying up to £7 extra for same-day delivery and 41% would pay that amount for next-day delivery.

Across the markets surveyed, willingness to pay rises to as high as 78% among under 45s – the most commercially significant consumer demographic for online retail. These digital native shoppers, often time poor, place a high value on speed and convenience.