Toy retailers are having a nightmare before Christmas with more than 5m fewer games and dolls sold than at the same point a year ago as struggling households cut the number of presents under the tree. The final three months of the year make up the “golden quarter” when retailers bank the bulk of annual profits. But after a difficult year a hoped-for pickup has not materialised, for toy retailers anyway, with sales down by 8% in value terms on 2022 in the 10 weeks to 10 December. Over the same period, the quantity of items sold has slumped by 10%, according to the data company Circana, which equates to about 5.2m toys. “Everyone is just being a little bit more cautious with their spending,” says Melissa Symonds, executive director, UK toys at Circana. “I don’t think people have not bought toys for their kids for Christmas but instead of purchasing four or five they’ve bought one or two.” Christmas is a crucial period for the sector, with as many toys sold in a week of December as in some months of the year. Squishmallows and digital pet Bitzee are among this year’s sought-after gifts. But Emma Dadswell, who runs her family’s shop, Toys ‘n’ Tuck in Southend-on-Sea, says people are feeling the pinch as the cost of living crisis drags on. “We’ve been having a really good year but at the back end we’ve noticed a lower average spend,” says Dadswell. “People are looking for a sale item, and to get the best out of Christmas they can; but on more of a budget.” With finances strained by rising bills and housing costs, nearly 300 customers have used the shop’s savings club, which lets them spread the cost. “This year the average spend has gone up,” says Dadswell. “Normally it’s about £180 but this year it is £250. They pay a 10% holding fee at the start and we ask once a month for a payment but that can be as little or as much as they choose.” When the Guardian pops in, Laura and Paul Sandgrove are collecting several large carrier bags straining with presents bought through the club for daughter Lily. “We started fairly early to spread the cost,” says Laura, who started using the scheme back in May. “Her birthday is in November as well so it is all at the latter end of the year. “Things are still constantly going up and there’s a level of uncertainty about what January is going to be like,” adds Paul. “So it is about being more cautious and instead of just going out and buying things for the sake of it.” The number of shoppers visiting high streets and retail centres had been rising as life returned to normal after the pandemic but Diane Wehrle, the chief executive of Rendle Intelligence and Insight, says that growth in footfall began to peter out as 2023 went on. By November, it was flat compared with the same month a year earlier. “The increases we had had in previous months have gone so we’re not seeing any growth in footfall,” she says. “There’s no more people out there this year than there was last. Things are definitely slowing. People are cutting out unnecessary trips and it’s more transactional. “Analysts talk about the ‘lipstick effect’ but while it’s indicative of people buying themselves a small treat as a Christmas gift, health and beauty products are more of a functional purchase.” Wehrle thinks that the combination of rising living costs, falling house prices and a weakening jobs market has resulted in a “Christmas of complete caution”. “Consumers are thinking: ‘What do I need to spend money on and what do I not need to spend money on.’ This is where the drop in toy spend is coming from, it’s almost adopting recessionary behaviour.” Faced with weaker-than-expected toy sales, major retailers have been slashing prices, with Dadswell reporting that discounting “has gone a bit deeper and on more items” this Christmas. Sales are running a “tiny bit” down this month but she estimates they will finish up on – or equal to – last year after strong trading earlier in the year. With four trading days left, retailers are hoping that last-minute shoppers will be out in force as schools and workplaces close. Gary Grant, the founder and executive chair of toy chain The Entertainer, had been anticipating an 11th-hour stampede but concedes that this week has yet to deliver that hoped for “bounce”. “I think it is going to be a tough Christmas.” However, Grant remains hopeful about the coming days and that Saturday could be “ginormous”, potentially setting a new sales record for the chain. “We’ve got three more trading days and they are all massive. We will take nearly as much money in a day as we do in any one week in January or February. It’s all to play for.”