Executive Summary

UK retailers are set to see sustained sales growth this holiday season:

• We estimate that UK retail sales will grow by 4.5% year over year this Christmas, taking total November and December sales to £81.8 billion. We expect grocery retailers and Internet pure plays to drive this growth and that store-based nonfood retailers will see relatively soft growth.
• We estimate that 20.6% of all November and December retail sales will be made online, which would make 2018 the first year in which e-commerce would capture more than one-fifth of all UK holiday retail sales.
• We expect nonfood e-commerce sales to reach a threshold, too, increasing to 30% of total holiday nonfood sales for the first time.
• Despite a benign economic context, challenged midmarket brickand- mortar retailers are likely to see sustained difficulties on two fronts. First, rising labor costs and high business rates have coincided with sales moving online, in turn deleveraging the fixed costs associated with brick-and-mortar stores. Second, pricecompetitive rivals in the e-commerce and discount channels continue to steal share from legacy retailers, while limiting those legacy players’ ability to pass on higher costs to shoppers.