All things bright and digital!
A rollercoaster Christmas but 2008 likely to be a tough year
The internet is this year’s rising star with the number of consumers doing Christmas gift shopping online set to double to 14 per cent compared with 2006.
This is according to the annual Retail Review by business advisory firm Deloitte which suggests that this year’s Christmas will test the ability of retailers to anticipate consumer expectations and emerge as New Year winners.
“The impact of the credit squeeze could play out in consumer behaviour in the coming weeks but we think it’s unlikely,” says Tarlok Teji, head of retail at Deloitte and based in the firm’s Leeds office.
The predicted overall spend per person for this Christmas period in Yorkshire and the North East is up 19 per cent at £730, which is 3 per cent higher than the national average. The average spend on gifts is likely to show an all time high of £415 per person, compared with £391 in 2006, helped by a greater emphasis on luxury gifts such as a designer handbag.
The old adage of a little of what you fancy does you good looks as if it will be followed this year. Despite the recent headlines about house prices and bruised financial markets, spending on food in the region is expected to average at £167 compared with £132 last year.
The party spirit is also definitely back with the average spend on socialising in the region’s pubs, clubs and restaurants likely to be £148 compared with a miserly £89 last year, a massive 67 per cent hike.
What also emerges from the Review is that more consumers in Yorkshire and the North East than in any other region are planning to pay for the majority of their Christmas expenses using cash or a debit card (89 per cent) and less likely to use a credit card (9 per cent).
Early indicators, based on an updated survey of consumers in the first week of November, show that with confidence in the labour market, people feel secure in their jobs and the general sentiment is robust.
“Consumer appetite for all things hi-tech will reach new heights over the festive period and children in Yorkshire are more likely than any other region, apart from Wales, to wish for electronic gifts this Christmas,” according to Mr Teji.
“Christmas goes electric, as not only 93 per cent of the population use digital technology such as mobile phones, two-thirds also use the internet in some way over the Christmas period. Twice as many consumers compared with last year are opting for the convenience of the internet to do most of their Christmas gift shopping.
“The UK consumer is smart and sophisticated and during the festive season demonstrates different shopping behaviour than the rest of the year, in spite of the economic conditions, consistently during the ‘golden quarter’ there seems to be an underlying resilience to spend for Christmas and the New Year.”
Mr Teji believes that the evolution of the UK consumer into a complex, unpredictable and empowered individual has challenged the retail industry. In the past five years, retailers have responded to demand for lower prices, convenience, improved product ranges and value for money.
“Whilst consumers have become more astute with higher expectations, as a nation on the move, with more money and less time, we are becoming ever more demanding and want services to be available any time, any way and any place. In fact, these changes and demands mean it is increasingly difficult to segment consumers into clearly defined profiles. We have, therefore, moved from a nation of shopkeepers to a country of canny consumers.”
He underlines the fact that the language used by today’s consumer has changed and the statement ‘you’ve got mail’ doesn’t mean the postman has made a delivery any more. Essential words unheard of amongst our parents’ generation didn’t exist or had different meanings such as Amazon, eBay, Google, Facebook, webcam, iPhone, PS3, Wii, HD, plasma etc.
“All of these words are now part of our ‘digital dictionary’ and for generations X, Y and Z they drive their consumption habits. For those people who are pining for the traditional high street of yesteryear with the butcher, baker and candlestick maker, our message is that the world has moved on. The consumer has moved on and retailers also need to evolve in order to survive in one of the most competitive retail landscapes in the world. So a multi-channel marketing media strategy is a must for connecting with today’s sophisticated consumer.”
Mr Teji warns that in today’s retail environment it’s not about the big eating the small and a need for more regulation to contain them, it is actually about the fast beating the slow and a consequent need for less regulation to allow the fleet of foot to flourish.
He said consumers had been delivering a consistent message for the last 13 years and their number one requirement is convenience not price and this year the message is even louder and clearer.
“Consumers take price, value for money and convenience as a given and want more than that as part of their shopping experience,” he adds.. “We live in an affluent society and this is one of the reasons the UK is a magnet for migrants, but this also seems to make spending in the festive season resilient. This has enormous implications for shopping patterns and behaviours and ultimately the retail offer.”
As Christmas goes electric, retailers’ tills will ring more loudly as technology items tend to be more expensive. In addition to hi-tech goods, the expected increased spend can also be attributed to a strong demand for luxury, in both gift items and food and drink.
More traditional toys will, however, prove popular this Christmas with bikes and outdoor toys such as skateboards and trampolines at the head of the list. At the same time, it seems that children haven’t lost interest in toy figures as Action Man and Transformers are also being widely requested. Girls will also be expecting Barbie and dolls such as Baby Annabell and Bratz in their stockings.
Video games consoles such as Wii and iPods are leaping up the gift lists. Forty four per cent of consumers will buy a computer game for friends or family, up from 38 per cent in 2006, and 26 per cent expect to purchase an MP3 player, up from 20 per cent in 2006.
The top ten wish lists for men and women vary considerably, although both show a desire for indulgence and ‘experience’ presents, such as holidays and entertainment tickets. Men prefer to add to their gadgets collection and have asked for flat screen TVs and sporting equipment, while women appreciate beautification, hoping to receive cosmetics, fragrances and jewellery.
This year the High Street continues its fight back at the expense of the department stores, claiming a bigger share of Christmas gift shopping. Supermarkets are an important part of a shopper’s store repertoire when gift buying but when considering where consumers do most of their shopping, supermarkets are losing an increasing share of consumer spend.
The top five destinations for Christmas gift shopping this year are:
- The High Street
- Internet and mail order
- Department stores
- Supermarkets
- Out of town retails parks and internet
“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,” said Mr Teji.
“In our view it will be a good Christmas, that’s what retailers and, more importantly, consumers tell us. But 2008 is likely to be a tough year. February and March may require a new streamlining diet for retailers if they are not properly prepared for the fall off in trade.”
About this survey
The survey findings were based on consumer data obtained by market research undertaken by TNS on behalf of Deloitte. Over 1000 adults aged 16+ were interviewed on 31 August 2007 - 2 September 2007. The respondents were selected according to a quota sample designed to be representative of all UK adults. Replies were also received from questionnaires sent out to over 350 of the United Kingdom’s retailers. The retailers were from a cross-section of the industry.
Survey questions relating to how much consumer will spend and confidence in the economy were repeated between 2-4 November 07.
