Customer spending has dipped, shows ONS stats

Retail sales in the UK stumbled slightly in December 2024, dipping 0.3 percent compared to November, according to the Office for National Statistics (ONS). While the holiday season usually provides a welcome boost, this year’s results didn’t deliver the festive cheer many retailers had hoped for.

David Paulding, VP International at Nextiva, summed up the mood, calling December’s sales performance “a far cry from the golden goose retailers were counting on.” This drop followed a 0.1 percent rise in November and contributed to an overall 0.8 percent slide in retail volumes for the final quarter of 2024 compared to the previous one.

Mixed sector performance

Despite the overall slowdown, not all retail categories were left out in the cold. Clothing retailers enjoyed a surprise comeback, with sales volumes surging 4.4 percent in December after two months of steady declines. Online shopping also saw a seasonal lift, with spending up 1.5 percent from November. Online sales accounted for 27 percent of total retail activity in December, nudging up from 26.5 percent the previous month.

Similarly, findings from CX Network’s upcoming Global State of CX 2025 report reveal that 47 percent of customer experience (CX) professionals plan to boost spending on digital experiences. Yet challenges remain: a significant 33 percent of organizations admitted to having fragmented omnichannel systems, which could hamper efforts to create seamless shopping experiences across channels.

Annual overview

Zooming out, there’s room for cautious optimism. Retail sales volumes for 2024 rose 0.7 percent, marking the first annual growth since 2021. This rebound follows consecutive yearly declines of 2.9 percent in 2023 and 4.1 percent in 2022. While sales still lag 2.5 percent below pre-pandemic levels, the trajectory hints at gradual recovery.

What’s driving this improvement? For one, businesses are leaning into technology. According to the Global State of CX 2025, AI-powered tools like generative chatbots, automation, and data analytics are helping retailers adapt to shifting customer expectations. Additionally, 42 percent of CX practitioners say they’ll increase investments in data and analytics this year—a clear sign that insights-driven strategies are key to staying competitive.

Challenges ahead

The retail landscape in 2025 isn’t without hurdles and in the UK last year, the sector saw significant job cuts. Looking ahead, Paulding highlighted the “triple negative” weighing on the sector: softer-than-hoped-for year-end sales, rising employer national insurance contributions and ever-growing customer expectations.

To overcome these challenges, retailers must double down on connecting with their customers. “Brands that can meet shoppers where they are — whether online, in-store, or via apps — will keep them spending,” Paulding explained. However, only 14 percent of organizations reported having a fully integrated omnichannel system, a gap that could become increasingly costly in a fast-evolving market.

Broader economic context

It’s worth noting that the 3.6 percent year-on-year increase in retail sales volumes in December is partly due to a low base effect from December 2023, which saw unusually subdued sales. Additionally, the shift of Black Friday promotions into December likely provided a temporary boost, masking broader consumer caution.

CX Network’s report suggests that retailers should turn to tools like passive voice of the customer (VoC) methods — used by 42 percent of companies — to better understand customer sentiment. In contrast, active methods like social listening have dropped to just 2 percent of planned investment priorities.

The path ahead for CX

As 2025 begins, brands that adapt by offering competitive pricing, broad product choice and exceptional customer service are likely to emerge as winners in the months ahead.

To build resilience, organizations are increasingly utilizing AI for hyper-personalization, with 20 percent of respondents citing AI/ML as a top investment priority for business operations. Moreover, 76 percent of CX practitioners reported that data analytics had delivered positive financial benefits, reinforcing the importance of data-driven strategies. The road ahead for retailers will hinge on their ability to foster omnichannel cohesiveness, utilize advanced AI tools and act on customer insights to deliver personalized experiences.

Quick links:

• Ipsos consumer survey confirms growing concern for digital accessibility in CX
• Customer-centric companies achieve 2x revenue growth, says McKinsey
• Bad CX could cost companies $3.8 trillion in 2025

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