Consumers have a merry Christmas while they still can
Christmas this year may be the second one consumers have faced in a recession, but new research from Mintel reveals that retail sales are still growing in volume and value terms and that this Christmas is set to be good news for the high street.
Mintel forecasts growth of 2% from last year in retail sales in December, driven by the recovery in consumer confidence, continuing low interest rates and a mini boom in sales before VAT goes back up on 1st January.
The exclusive research shows that even though consumers will continue to be a little more cautious this Christmas, the number planning to spend 'a lot less' on gifts has fallen 3% year on year. In addition, 20% of consumers claim that although money is tighter, they will still splash out for Christmas – a figure unchanged from 2008 and therefore unaffected by the economic crisis this year.
Richard Perks, Director of Retail at Mintel said:"Consumer confidence has been steadily improving in recent months and the proportion of people feeling relaxed about their financial situation has been increasing, even though they know there are problems ahead. There's no doubt that consumer demand has held up far better than anyone expected a year ago and that is entirely down to the cuts in interest rates. Knowing that there are tough times to come, consumers will decide to have a 'good Christmas' while they can still afford it."
However, while online sales are set to grow, the numbers using the Internet for shopping for gifts this Christmas will remain fairly static – perhaps surprising when consumers are planning to spend more. Indeed, as in 2008, 22% of consumers claim they prefer to use the internet for Christmas shopping and 29% say they will use the internet for 'a few' gifts – just 1% up on last year.
"The lack of increase in using the Internet to shop for Christmas presents is very surprising and taken at face value it would suggest that online shopping has reached a first stage of maturity. However, it is more likely that the lack of growth this year reflects the postal strikes and that people don't feel able to rely on receiving the goods they've ordered in time for Christmas." Richard continues.
However, it's not all good news for retail as the VAT change after 1st January is set to impact consumer spending behaviour. While Mintel forecasts a rush of buying in the week after Christmas to beat the VAT hike and retailers capitalising on this by bringing sales forward, prospects for 2010 and 2011 are poor with incomes being squeezed by higher interest rates and taxes.
Furthermore, despite spending set to increase, it seems the economic climate has made its mark on consumer attitudes to spending. One in three consumers (34%) say they have a budget for spending which they stick to – up 2% from 2008.
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