Christmas trading turned out to be rather disappointing. There was a marked slowdown in retail sales growth in December, exacerbated by Black Friday and other end-of-November discounting pulling sales away from December gift buying. We argue that such discounting is bad news for the retail sector. It is a major factor in undermining people’s trust in retailers pricing and the majority of people think there is no point in paying full price for gifts because of the degree of promotional activity in the run-up to Christmas.

Online took an increased share of retail sales in 2015, but it is important to get it in perspective. The pure players saw their share decline in the final quarter, while the store based retailers powered ahead. We argue that for a store based retailer online provides a multi-channel service to customers, while only for the pure players is it the only route to market. And the pure players take just under half of online sales – just over 6% of all retail sales.

The outlook for 2016 is uncertain and the uncertainties increase towards the end of the year. We think that uncertainty is one of the reasons for the weakness in retail sales. But confidence is high, unemployment is falling and real incomes are growing, 2016 should be a reasonable year for retailers but it will not be easy.

This report looks in more detail at Christmas shopping habits:

• What people spent money on.

• Where people spent their money – in-store or online.

• How shopping patterns are changing.

• How much they spent.

• How retailers performed.

• What the prospects are for 2016.

• The lessons from Christmas 2015.