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Shopping online and demand for high-tech items sees huge lift

Monday November 12th 2007

Use of the internet for the bulk of Christmas shopping has doubled since 2006 (14% in 2007, versus 7% in 2006), according to the Annual Christmas Retail Survey published today by Deloitte.

74% of consumers will use online or mail order in some way for their Christmas shopping and two thirds (66%) of consumers will research or purchase goods online compared to half of the population (51%) last year. Consumer appetite for all things high tech will reach new heights over the festive period.

Tarlok Teji, head of retail at Deloitte, said: “This year, Christmas will go electric as consumers embrace the digital age. More people will shop online this year than ever before as the appeal of cyberspace to avoid the Christmas crush takes hold. High street players are responding to this growing trend. Our research shows a huge growth in the number of retailers providing online stores this year compared to previous years (51% in 2006, versus 72% in 2007).”

Digital themes“Further

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evidence of the move towards all things high tech can be seen in the type of goods consumers plan to buy. Video games consoles such as Wii and iPods are leaping up the gift lists. 44% of consumers will buy a computer game for friends or family up from 38% in 2006, and 26% expect to purchase an MP3 player this year up from 20% in 2006.”

Despite the recent headlines about house prices and bruised financial markets, total spend this Christmas is up 7% on 2006. Consumers expect to spend on average £706 per person compared with £662 in 2006 showing little signs of dented confidence and cut backs.

As Christmas goes electric, retailers' tills will ring more loudly as technology items tend to be more expensive. In addition to high-tech goods, the expected increased in spend can also be attributed to a strong demand for luxury this Christmas in both gift items and food and drink we will buy.

Luxury for all

Tarlok Teji, head of retail at Deloitte, said “Indulgence is a common theme at Christmas and this year it will be strong. We expect there to be a notable rise in high end, more expensive gifts purchased particularly designer labels. Indeed consumers (17%) plan to buy more luxury items this year and 19% intend to buy a designer handbag or shoes as a gift for friends and family. A further 19% also have designer items on their Xmas wish list and 31% of these are women aged 16-31.”

According to the research spend on gifts will rise by 2% per person from £378 in 2006, to £385 in 2007. A bigger rise than expected in the wake of recent unrest in the financial markets.

How will the credit crunch impact consumer spending?

UK consumers appear to have brushed off economic concerns. When surveyed in mid-September about how much they planned to spend at Christmas, consumers predicted their total Christmas spend would reach £706 per person.

To gauge the impact of the credit crunch and wider economic fears, consumers were surveyed again in the first week of November on questions relating to spend and confidence in the economy. Consumers provided an almost identical response to their pre-credit crunch estimations of £712 per person.

Consumer confidence in the UK economy did slip between September and November according to the research, but only marginally. In September 47% of respondents expected the economy to get worse over the next 12 months, in November this had risen only slightly to 50%.

Richard Lloyd-Owen, head of consumer business at Deloitte, said: “Early indicators suggest concerns about bruised financial markets and consumer confidence are nothing more than concerns. With confidence in the labour market people feel secure in their jobs and the general sentiment is robust. Signs of a housing slowdown could affect consumer sentiment and the credit crunch has made lenders reticent which puts a squeeze on the availability of credit and loans."

“Despite this, there's little evidence of household cut backs. The impact of the credit squeeze could play out in coming weeks when events have had time to percolate through consumer mindsets, but we think it's unlikely. Movements in interest rates or price hikes on petrol now that crude oil prices are at all-time record high, are much more likely to trigger a reluctance to spend, as these have a direct impact on the health of bank balances at the end of the month.”

A nation of party goers

The party spirit is back. A pick-up in socialising spend is expected following the steep fall (-16%) in 2006. Money spent on going out to pubs, clubs and restaurants over the festive period will rocket to 18% growth per person, from £121 in 2006 to £143 in 2007.

Food shopping goes local

Where we will buy food also shows signs of change. Grocery retail will capture the bulk (77% in 2007, compared to 79% in 2006) of Christmas food shopping, but 'going local' for food is growing in popularity. 29% of consumers, up from 20% in 2006, will head to small independent stores and local farmer's markets (16%, up from 9% in 2006) this Christmas to do a proportion of their food shopping over the holiday season.

Teji said: “Total expenditure on food and drink is up 9% on 2006. This is partly driven by consumers trading up and indulging themselves with premium, provenance and fair-trade products.”

The biggest challenge for retailers is to meet the growing demand for local products. To have a local offering retailers need to have all their ducks in a row when it comes to sourcing and suppliers. Those that manage to make it work will be able to tap into a growing trend.”

Regional view

Regional breakdown of the figures reveals the Scots are the most generous and the UK's biggest spenders when it comes to gifts (on average £496 per person) compared to those in the West Midlands who will spend the least across the UK on gifts (£307). The Scots (£204) will also spend the most on food and drink this year and people in Yorkshire will spend the least (£148 And 38% difference).

Consumers in the West Midlands will also tighten up on their out on the town expenses (£105) and will spend the least on going out (who spends the most out of the regions? North West spends £178).

When it comes to the total amount to be spent at Christmas by the regions, the Scots rise again to the top of the rankings. The Scots will be the biggest spenders overall with £848 in total compared with the West Midlands which will spend the least overall at £571.

The Christmas Retail survey in its 13th year looks at the spending habits and moods of consumers and retailers ahead of the Christmas period.


Tags: deloitte