New research forecasts that UK consumers will spend GBP82.3bn with retailers in the final quarter of 2008 or GBP1,363 per head. Though this is an increase of 2.0% on 2007, it is the second lowest growth rate in 20 years and the GBP1.6bn extra shoppers will be spending will be more than eaten up by food inflation. Not surprisingly food & grocery accounts for the largest share of shoppers spending over the Christmas period (38%), and with food inflation running at 6.3% this quarter, consumers are facing a more expensive Christmas feast.  But unavoidable though this extra expense will be, shoppers will be more careful in what they buy, balancing spending on treats with cutbacks on everyday foods.

In the toughest economy for years; all instincts are telling retailers to baton down the hatches. In reality, anything is possible, with it being the best time in the last 15 years to reduce operational costs and beat inflation by maximising built assets. Tenants are becoming customers, retailers are becoming developers undoubtedly times are tough, but now is the time to innovate.

For non-food retailers life is going to be particularly tough. Unless they can stand out from the crowd with a compelling offer they will be passed over by far more selective consumers.  Home related specialists will be the biggest losers, with sales of DIY and furniture & floorcoverings falling into negative sales despite inflation.  Unlike the majority of the retail sector, the Christmas season does not constitute the major part of their sales, and the collapse of the housing market will worsen this trend.

The share that food takes in our spending at Christmas, and its inflation rate of 6.3% is a key factor in the rise in overall retail inflation. On the other hand food volumes are coming down as consumers eke out their budgets, cut down on impulse buys and reduce unnecessary car journeys. Online orders of food & grocery will hit an all time high of GBP2.2bn, over 50% higher than in 2007 and account for 6.9% of all food & grocery spending during the quarter, with consumers valuing the convenience of home shopping services more at a time of year when they have many other time commitments.

Electricals will be a star performer this Christmas with sales rising by 4.6% to GBP8.3bn. Key to this will be further sales of games consoles, which carry affordable price points. In addition, the huge growth in the number of console owners over the last year, combined with the launch of many new titles, means that software sales will be substantially higher than a year ago. However aside from the boom in gaming, the rest of the electricals market will struggle with a lack of compelling new technology launches limiting the opportunities for electricals retailers.

The one non-food sector that appears to be truly recession proof is health & beauty. Sales will be up by 3.7% despite inflation in the sector. Its not just women who want to look good, even at the worst of times, men are following suit and are becoming just as likely to buy skin creams as women. As a nation we spend more on health & beauty per head than any other in Europe and Christmas is a prime time for gifting health & beauty products.

There are plenty of opportunities in the retail market right now utilising built assets is a key driver in getting more from less. We have identified seven steps to successful retailing to meet retailers needs.

Related reports: How Britain Shops 2008: Sector Summary