Christmas Shopping Explained

Manchester saw record numbers in the city centre last weekend; visiting the Christmas markets, enjoying a mulled wine or a gingerbread latte and, of course, going shopping. A boost in retail sales was predicted by, amongst others, Deloitte who projected an increase in sales of 3.5% to £40 billion, this year.

Predicting a year on year increase at Christmas is a very safe bet. We always spend more than last year at Christmas. Even if we say we are not going to. Last year, according to a YouGov surveyconsumers in the lower socio economic grouping of C2DE said the would spend significantly less in 2012 than 2011….but their actual spend was higher.

Consumers’ intentions are not a very good predictor of their behaviour. Asked way before Christmas, when stories about redundancy and recession are rife, it is not surprising they prefer to project an image of caution. But in the lead up to Christmas, the retail sector works very hard to encourage people to part with their money, tempting us with seasonal product ranges and festive merchandising – in the four days before Christmas alone Verdict estimate over £12 billion will be spent this year.

Given the ever increasing commercialisation of Christmas it is not surprising we are getting better at being consumers. Last year Internet users started to search for the word ‘sales’ online around about 14 December. Economically savvy consumers have already pulled forward the January Sales to Boxing Day and now they expect heavy discounts before Christmas.

Last week, PricewaterhouseCoopers said that 72% of the high street already had a sale – with the average discount being 46%. Just because items are cheaper doesn’t mean that we spend less. Most Christmas shoppers have a predetermined idea of how much they will spend per person on their list. So, we get more gifts for our money, the retailers move more stock but profit margins are reduced.

The squeeze on profit margins may be felt even more strongly this year as more people shop on the Internet relying on ‘click and collect’ services. Whilst this is convenient to the customer it can be expensive for the retailer, especially the cost of dealing with returns. For example, John Lewis ‘click and collect’ customers have 5 different ways to return unwanted goods. So much more complexity for the retailer to manage than the old ‘returns’ counter – where the customer also met the transport costs incurred in bringing the item back.

With 1 in 5 gifts being bought on-line does this mean further bad news for the high street? According to Experian, there were 113 million visits to retail websites last Boxing Day. However, footfall data shows the same number of people still went to visit the shops on Boxing Day. For many people, including the half a million people that visited Manchester at the weekend, going to the shops is synonymous with Christmas. I predict I will still be saying that for many years yet.

Surely, there is more to life than shopping?

Stephen Robertson, Director General of the British Retail Consortium announced that UK retail sales values were down by 0.4% on a like-for-like basis from August 2011, when they were down 0.6% on the preceding year.

He said “”there’s no evidence here of any Olympic boost to retail sales overall. Sadly, apart from April – distorted by Easter timings – August saw the worst sales growth this year”.

“Hot weather and the Olympics did help sales of party food and drink but that was more than offset by a really weak performance for non-food goods”.

“It’s clear people were absorbed by the magnificent Olympics and had little interest in shopping, especially for major items. Usually-reliable online sales suffered, putting in the worst sales growth since we started the measure four years ago. Some retailers told us online activity was particularly thin in the evenings. If people weren’t watching television they were more likely to be following the sport on PCs and mobile devices than shopping”.

Here at the IPM we feel we have our sense in human nature restored by such a story. Retailing is important…but is not everything. If people were enjoying the Olympics and not shopping then so be it. Come on BRC get a sense of perspective…….