It may still be six months away, but Christmas is the industry’s peak trading period, so retailers and brands must start their preparations now if they are to make it a great one.
Despite predictions of gloomy Christmas trading over recent years, consumers have shown a remarkably resilient approach to their festive spending. This year, analysts are still cautious because of the economic picture but retailers will be hoping consumers once again choose to splash out this Christmas.
What happens to interest rates will have the biggest impact on consumer confidence. As Nick Bubb, retailing analyst at Arden Partners, says: “Interest rates are likely to be rising by then and the question is how will consumers respond. Will they think: ‘Oh it’s only 0.25% every three months’ or ‘Oh no, interest rates are going up to 5%’.”
As interest rate rises tend to be linked to the Bank of England’s quarterly inflation report, it is expected they will rise from their current rate of 0.5% in August, November or both, according to Bubb.
The weather effect
Another major factor will be the weather, which will affect comparative sales this year during the last week of November and the week before Christmas when, due to last year’s snowfall, many consumers just couldn’t get to the shops.
“Last year the snow affected sales over those periods by 3% to 10%,” says Freddie George, research analyst at Seymour Pierce. Last year’s weather also affected types of clothing sold, with partywear suffering as events were cancelled, consumers were unable to make the trip to the shops and the mood of austerity meant celebrations were downgraded. However, coats and leather boots both did exceptionally well as cold weather drove purchases.
This Christmas, market research group Kantar Worldpanel is expecting boots for men and women to continue to sell well. It also expects dresses to be among the winners; formal partywear may suffer, however, as more people celebrate at home. Ian Mitchell, strategic insight director at Kantar Worldpanel, says trends in consumer purchasing apparent all year tend to continue over Christmas and, currently, the strongest pattern in fashion is that people are cutting back on the number of items they buy, but paying higher prices.
“Consumers don’t behave any differently to the rest of the year, they shop from the stores they always shop from, and stick with the brands they are already familiar with,” he says.
Discounting over October, November and December, which accounts for 30% of fashion and footwear sales according to Kantar Worldpanel, is unlikely to rise dramatically this year, say analysts.
“Over the last two to three years retailers have stocked up very cautiously for Christmas and I’d expect the same this year,” says Richard Perks, director of retail research at Mintel. With consumer spending kicking off after November’s payday, retailers may need to hold their nerve on discounting, especially on menswear, which is always bought later than womenswear. “If people are going into Christmas very cautiously, we could have a late rush of buying,” says Perks.
Maureen Hinton, lead retail analyst at Verdict Research, says retailers will have to be more original with their offers: “This Christmas retailers will need to be special, have a unique offer, good customer service and the right stock levels to maximise sales. They must make sure stock is available via multichannel means and draw up an effective promotional calendar to drive people in store.”
Overall, analysts predict sales will be flat, including inflation, with the caveat that a double whammy of higher-than-expected interest rate rises and a repeat of last year’s snow could change the picture completely. Only one thing is certain: Christmas will happen.