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What Christmas means for retailers

For countless retailers, Christmas is the busiest time of year and one that can make all the difference to their annual figures.

Many's the time retailers have hit the news because they've posted poor profits over the first eleven months of the year, only to turn their fortunes around when the jingle bells start ringing. In fact, Cardiff-based insurance firm Atradius estimated that around a third of retailers' total yearly intake will take place during November and December.

This year is no exception, with Britain's finances still grabbing the headlines. For savvy retailers, however, this Christmas could see them as eager as any child awaiting the arrival of Lapland's most famous resident.

The spend of Christmas past

John Lewis is often used as the typical barometer for Christmas sales. When this archetypally British store does well, it's thought to signal a stronger economy - whereas in times of national trouble, John Lewis starts to struggle. In early 2012, the store hit the headlines for having a strong festive season; with like-for-like sales increasing by 6.2 per cent during the five weeks to New Year's Eve.

Waitrose, which is also owned by the John Lewis Partnership, also posted positive results - as did Boots, Debenhams, Greggs, JD Sports, Primark and Superdry. Whilst many of these firms had been experiencing difficulties in the run-up to December, positive end-of-year figures turned their fortunes firmly around.

Firms looking to replicate such results need only look at what prompted the sale and understand that a Christmas shopper is a wholly different entity to the one who may visit over the remainder of the year.

Supermarket chain Sainsbury's, for example, saw a rise in its luxury range - with consumers tightening their belts in October and November so they could splash out over Christmas. The result was that by December, certain cheaper products were shunned in favour of their more luxurious counterparts.

Furthermore, rewards points that are built up over a long time (in the case of Sainsbury's and its Nectar Points) also play a part. Last year, shoppers seemed to save their points up until the festive season, whereupon they were used to take the sting out of Christmas's notoriously large trolley loads. It also makes the purchase of such opulent items as champagne much easier, fostering the notion that they are 'free' (with the points collected).

This year, to save me from tears...

Forecasts have begun rolling in for what businesses can expect during 2012, with analyst Mintel predicting a three per cent growth in December as a direct result of improving consumer confidence. This was based on improved results for the earlier months of the year; noting the score is a median and the leisure industry could see even greater results.

Retailers looking to cash in on the Christmas pound may not always need to rely on the luxury approach used by Sainsbury's. Greggs' positive results were last year said to be as a result of its well-publicised 30p mince pies. Shoppers looking for a quick - not to mention festive - refuelling headed to the bakers in their droves, racking up a total sales volume approaching 7.7 million units over the Christmas period.

For certain locations, retailers or suppliers, the budget approach works best, catching impulse buyers who are already in the spending mood who would barely register an extra couple of pounds on top. Given that the average consumer is expected to spend in the region of £445 this year (following research by MoneySupermarket), one or two extras on top can be easily added.

For those who work on bigger sales, however, the opposite still looks set to be the best option. Last year, Superdry - still reeling from an IT glitch which caused a sharp drop in value - refused to cut prices ahead of Christmas and even managed to post a nine per cent rise in like-for-like sales.

In addition, by using the John Lewis barometer, 2012 looks set for a Christmas - with sales up by 7.6 per cent during the week beginning 12th November, thanks to early starts on present shopping.

January sales

Looking ahead, Mintel added that the three per cent growth could last well into the new year, with Eurozone fears slowly receding alongside the income squeeze. This growth could be compounded by higher levels of disposable income, thanks to increasing wages.

Despite widespread reports of wage freezes, 2012 saw an increase in the average full-time salary to £26,250. This increase, discovered by the Office for National Statistics, represents a 1.4 per cent year-on-year rise. It means that if the current trajectory continues, the total could grow even further to £26,618 by April 2013.

Going once more back to John Lewis, the retailer said that despite claims from other stores of early sales to bring customers in for their present-buying, sales wouldn't start on its online offering until 5pm on Christmas Eve - or the start of trading on December 27th for physical stores.

The decision, however, ultimately rests with the retailer. Those not confident of a Christmas rush may wish to bring down prices or ramp up marketing ahead of schedule to encourage more shoppers away from rivals and in through the doors. Those expecting healthier results, meanwhile, may do better from keeping everything unchanged and only offering sales once the Christmas rush is over - if at all.

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