While industry gears up for the Christmas trading period (also known as the “Golden Quarter” for retail businesses), there’s a real sense of nostalgia, opportunity, and optimism over the months (and indeed, years) to come. 2023 offered very little in terms of seasonal demand peaks and one could argue it’s been an “eternity” since the seasonal peaks of old; which perhaps explains the nostalgia we’re all feeling right now. With economic conditions improving [1], consumer confidence rising [2], and recent GDP growth beyond initial expectations [3], 2024 has all the hallmarks of a return to normality and, perhaps, a return to the seasonality to which the retail industry is accustomed.
As we’ve previously discussed [4], the absence of traditional Christmas and summer peaks in recent years have disrupted the usual rhythm of logistics planning, particularly in the case of the retail sector. This has ultimately led to a strategic shift from aggressive growth stratagems during seasonal peaks to that of trimming CapEx expenditure and streamlining operations with a transition from just-in-case to just-in-time inventory models. Overall, the strategic shift has been beneficial in the short-term, with retail and ecommerce businesses being leaner, and meaner, than ever before. But as we approach what could be a return to extreme seasonality, are retailers ready, and have they learned from past lessons [5] to balance supply chain risk with lean inventory management?
The Golden Quarter: UK Economic, Retail & E-Commerce Forecast 2024-2025
So what exactly can we expect out of 2024’s Golden Quarter? Well, it differs from sub-sector to sub-sector, but the general feeling is that both sales volumes and sales values are set to rise from 2023 levels on the whole. Indeed, estimates from Retail Economics (and published by Retail Week) [6] project year-on-year growth across most, but not all product categories:
Food and Groceries: 3.8% rise in value growth, 1.3% rise in volume growth
Fashion: 1.9% rise in value growth, 2.4% rise in volume growth
Health and Beauty: 2.8% rise in value growth and 0.3% in volume growth
Homewares: 2.5% rise in value growth and 3.4% in volume growth
Electricals: 1.9% decline in value growth and 2.8% decline in volume growth
Toys and Games: 2.1% rise in value growth, and 2.6% rise in volume growth
Furniture and Flooring: 3.6% decline in value growth, and 1.8% decline in volume growth
DIY and Gardening: 1% increase in value growth, and 0.9% decline in volume growth
On the ecommerce front specifically, online sales currently account for 26.7% of total sales (as of July, 2024) [7] and there are expectations that this could rise during the Christmas trading peak. However, online retailers will certainly have to fight for these opportunities as IMRG highlights a prediction of stagnation in ecommerce growth (in line with its 0% growth prediction for 2024) and seemingly stresses the importance of customer-centricity. better communication, and improved handling of cross-border logistics to better capture those opportunities within the global market. [8]
Optimistic Golden Quarter forecasts form part of a broader economic picture, encapsulating strong GDP growth across Q1 (0.7%) and Q2 of 2024 (0.6%) [9], and the GfK Consumer Confidence Indicator for July, 2024 showcasing a visible return to 2019 levels of consumer confidence (Overall Index Score of -13). The findings also show a 7-point rise in consumer willingness towards making major purchases (Major Purchase Index), a 2-point rise in views on personal financial situation over the last 12 months, a 5-point increase in Savings Index (not included in the overall index score) [10][11], and we’ve even seen inflation drop to some of the lowest levels in years (2% in June and 2.2% in July, comparable to the Bank of England’s 2% target for inflation). [12]
A brief look at quarter-on-quarter GDP growth over the last 10 years [13] puts the significance of 2024’s Q1 and Q2 GDP growth into perspective. Setting aside Q3-Q4, 2020, and Q2-Q4, 2021 as quarters impacted by the COVID-19 pandemic (factoring in post-pandemic recovery), we haven’t seen quarterly GDP growth of 0.6-0.7% since back in 2019. Even then, the practical peak in GDP growth (again, excluding the aforementioned quarters) over the last 10 years sits at 0.8%, which was seen only twice in Q3, 2014, and Q1, 2017. As such, these figures portray a figurative turning point for the UK economy, with IMF, Lloyds Business Group and KPMG all forecasting strong GDP growth across 2024 (0.5-0.8%) and 2025 (0.9-1.5%). [14][15][16]
Even within consumer behaviours, we’re seeing some positive changes such as a shift towards smarter spending (as opposed to outright cutbacks), and strategic discounting has been successful in drawing in price-savvy customers. This cultural shift should support stronger retail performance across the Golden Quarter as individuals reward themselves for prudent spending behaviours and enjoy some well-deserved luxuries. Yet, access to these opportunities will depend not only on an ability to scale up and meet demand, but also the ability to meet evolving customer expectations as consumers focus more-so on product and service quality (69%) and convenience (59%) than price itself. [17] Evidently, the customer experience and ensuring brand loyalty are key.
Clearly, the UK economy is in a stronger position than it has been for some time and 2024’s Golden Quarter clearly offers significant opportunity to retailers that are able to recover from 2023’s disappointing Golden Quarter (where all three months recorded negative sales growth) [18] and quickly scale up to 2024’s much more optimistic seasonal peak. Unfortunately, that’s far easier said than done, with prominent retailers such as Next nodding to Red Sea shipping concerns that could affect deliveries in 2024 [19], and the supply chain disruptions over the past few years underlining critical vulnerabilities in global logistics networks and demonstrating the need for greater flexibility within the logistics supply chain; interestingly, these vulnerabilities perfectly align with the strengths of managed logistics services and Fourth Party Logistics (4PL) providers. [20]
Ian Cramb, Managing Director at X2 (UK), a leading Fourth Party Logistics (4PL) specialist, explained: “We can all agree that 2023 was an eventful year for retailers and, for many, Christmas trading volumes were far lower than they had hoped. The Golden Quarter of 2023 truly did not meet the expectations of a ‘seasonal peak’ as consumer behaviours shifted more towards cost-cutting than celebratory spending. But that’s a very different picture to 2024, where we’re now seeing a gradual return to more normalised consumer behaviours, a sense of people feeling ‘richer’ than they did in 2023, and many predicting the return of the iconic seasonal surge in retail spend.
“This sense of opportunity is further enforced by our own independent research into the matter, with 74% of respondents to our recent online poll claiming that they are confident (on a spectrum of ‘somewhat confident’ to ‘very confident’) that there will be a Christmas peak in 2024.. Yet, caution is still the word and that’s perhaps why organisations are increasingly considering Fourth Party Logistics partners like ourselves as a means to mitigate risks of over-resourcing if predictions are there will be a spike in demand and instead there is a repeat of 2023, or to allow for remaining cautious while having a nationwide network of transport partners on standby who can react if there is a spike in demand this Christmas period.”
The Need for Transformative Change & The Logistics Supply Chain
As for what retailers can do to get ahead of the opportunities (and indeed, challenges) for Q4 of 2024, the key takeaway is that retailers require flexibility should they have any hopes of capturing Christmas trading opportunity while mitigating the associated risk. Yes, optimistic growth projections have been shared that should lead to a return to the seasonality of old (even if it’s a more gradual return), but forecasts are not robust enough to transition back from a just-in-time model to that of just-in-case (nor would we ever argue for it); yet at the same time, the just-in-time model exposes organisations to the same fragility they suffered from back in 2020. Instead, 2024 may be the year of a more comprehensive approach to lean supply chain strategies and transformative projects to ensure future commercial success.
According to PwC’s 27th UK CEO Survey, 21% of UK CEO’s are concerned that their organisation may no longer be economically viable within 10 years (at least, on their current trajectory), and 53% highlighted that they are taking personal responsibility and are sponsoring transformation within their organisation. The drivers for this change are many, but notably include: increasing productivity (54%), managing risk and building resilience (39%), and sustainability (43%). And while most respondents highlighted areas such as sales and marketing (78%), or customer service (66%) as focal areas for investment, PwC rightly points out the need for greater insight into the logistics function as a means of driving supply chain and sustainability transformation. [21]
Of course, as we’ve already discussed plenty, the importance of the logistics function and the ability for organisations to ramp up CapEx into their logistical infrastructure deliver rather different responses. While investment into the logistics function is regarded as an essential means of enhancing the customer experience and expanding operational capacities, it comes with a CapEx cost that many organisations cannot effectively balance alongside their risk management strategy (within which, OpEx is king). As such, for many organisations the greater insight and strategic management of the logistics function (and indeed, the logistics supply chain) must come from elsewhere – specifically, outside the organisation. Importantly, organisations must act now, yet such change takes time; this makes the appeal of Fourth Party Logistics partnership even more valuable.
Thankfully, industry is moving, and organisations are already starting to realise the need for transformative change within the logistics supply chain as a means of moving away from just-in-time or just-in-case strategies and hybridising the strengths of both. Already, industry giants such as UPL [22], Mars [23] and ADM [24] have made transformative changes to the logistics function via partnership with 4PL services, reaping significant rewards in terms of customer experience, cost management and competitiveness, seasonal flexibility, and ultimately allowing for a more focused approach to growth with reduced exposure to risk. The industry is changing and 4PL is increasingly emerging as both the short and long-term answer for many businesses.
“Supply chain and sustainability transformation are key to both long-term and short-term success,” explained Ian Cramb, Managing Director at X2 (UK). “But it’s also a matter of risk. All signs point to the UK turning a corner and returning to an upwards growth trajectory, but organisations have been burnt by forecasts and economic speculation one too many times. Significant operational change (particularly within the logistics function) traditionally comes with significant CapEx spend that just doesn’t make sense for many organisations today.
“What businesses need in 2024 is flexibility to accompany the coming opportunities, rather than expanding risk. Seasonal peaks have always demanded a sense of flexibility, but retailers could historically rely on an abundance of seasonal trading volumes to justify that risk. As of today, the same exciting opportunities exist again but greater seasonal variance already has led to some retailers being caught off-guard by seasonal change and economic instability. That’s why it’s more important than ever to establish logistics partnerships that can guarantee flexibility, no matter the seasonal variance, and ultimately support a sustainable growth trajectory.”
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