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Christmas isn't cancelled as majority plan to spend same as last year
Archived article dated Wednesday November 12th 2008
In spite of the current economic turmoil, 57% of UK consumers say they intend to spend the same this Christmas as they did last year, according to the 14th annual Christmas Retail Survey, published today by the business advisory firm Deloitte.
Tarlok Teji, head of retail at Deloitte, said: “Although this Christmas may be one of the toughest in decades, retailers have been toughing it out for most of the year. We think the talk of Christmas being cancelled is overplayed. Whilst total planned spend including socialising may be down, the majority of consumers intend to spend the same as last year. Retailers will need to understand their consumers better than ever and offer relevant products to take a share of the Christmas wallet.”On average, consumers are planning to spend £655 on gifts, socialising and food and drink this year. This is 7% less than last year and when compared to the 7% growth the year before could be interpreted as a 14% drop in confidence.
Richard Hyman, strategic adviser to the retail practice at Deloitte, said: “These figures provide a very useful barometer for consumer confidence this Christmas. However, it is unlikely that actual retail sales will fall significantly. Broadly speaking, we believe sales will be flat this Christmas with a slight fall possible. Consumers need certainty to have the confidence to spend and retailers will be hopeful that last week's interest rate cuts feed directly into their disposable income.”
That's 'In-tertainment'
Consumers are expecting to spend less on gifts, socialising and food and drink but it is socialising where the biggest cutbacks are planned. Respondents say they plan to spend an average of £126 on socialising this year, 12% less than last year.
Teji commented: “Its all about 'in-tertainment' this year where staying in will be the new going out. This trend has come to the fore this Christmas. Non-essential discretionary spend is the first thing to go when people start to feel the pinch. However, this is good news for the grocery sector as people may spend more to entertain at home. This will include everything from cooking more with basic ingredients to partying with a technology twist such as karaoke and computer games.”
16-24 year olds offer glimmer of hope
Whilst 24% of consumers plan to spend less this year, one segment of the population is bucking the trend. 36% of 16-24 year olds intend to spend more and 49% say they are going to have a good time at Christmas and worry about the cost later, compared with 23% of 25-55+ year olds. They are also the most optimistic about the economy.
Teji added: “This age group have grown up in an affluent society with technology products and designer wear, are comfortable with debt and have never been in a recession. Their higher propensity to spend represents an opportunity for those retailers targeting younger consumers. However, the recent young fashion retail administrations demonstrate that attracting this young shopper not only requires having the right products on offer, but also trading in the right locations and channels to serve the 'I want it now' attitude of this group.”
Supermarket sweep
66% of consumers say they will use supermarkets for some of their Christmas gift shopping this year, compared to 52% last year. For consumers purchasing gifts from supermarkets, convenience (76%) and value (55%) are the two main reasons for doing so. Value is a much more significant driver for supermarkets than any other category. There were falls for farmers markets (16% to 13%) and luxury stores (6% to 4%) in terms of where people intend to do most of their Christmas food shopping whilst supermarkets are more popular rising from 77% to 79%. Furthermore, 27% of people plan to buy more supermarket own label and value brands.
Hyman commented: “Whilst grocery as a whole should fare better than most during the downturn, there will still be some very clear winners and losers within the sector. Discount grocers are seeing rapid growth and this is set to continue through the Christmas period with 29% of consumers planning to do more of their Christmas shopping at value stores. Furthermore, whilst the move towards value and price is pronounced in grocery, it will be felt across the industry.”
Trouble in 2009
According to the survey both retailers and consumers think 2009 will be tough. 83% of retailers and 64% of consumers believe economic conditions in the UK will deteriorate.
Hyman added: “What is clear is that 2009 is going to an extremely difficult year. It is possible we may see negative sales growth and this would be too much for some companies. Casualties are likely and these may begin with suppliers to retailers.”
Regional view
Consumers in the North East feel most pessimistic about the economy, with 82% currently rating it 'bad'. 78% of consumers in the South East and 76% in the North West feel the same way, whilst those in Yorkshire & Humberside feel most optimistic with 10% saying the economy is currently 'good'. Those in the North East are also the most downbeat about prospects for 2009 with 75% expecting the economy to get worse.
North West and Scottish consumers plan to make the biggest cutbacks in spending this Christmas with respondents telling us they plan to spend 16% less this Christmas than last, followed by consumers in the North East and Yorkshire (15% less). Perhaps surprisingly given the current economic turmoil in the financial services sector, consumers in London are planning to spend 7% more than last year.
Tagged as: deloitte | economy | christmas
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