The tarot cards have been shuffled, the crystal balls have been polished and retail commentators everywhere have donned their Romany head-scarves. Yes, it’s the great annual Christmas forecast show.
The sport is always something of a guessing game, not least because it is so dependent on a mercurial commodity that affects every retail business but which is rarely discussed. No, not service, range or value, but confidence.
So much of our society, especially the economy, is founded on confidence. The present banking crisis has been born out of a loss of confidence, which reached its ultimate expression in the snaking queues of savers outside Northern Rock.
A run on a bank is nothing more than the public’s response to a loss of trust that the bank can continue to meet its debts. Behind the scenes, the credit crunch is the result of a loss of confidence between banks.
The institutions don’t want to lend to each other because they’re unsure as to which ones are facing what losses as a result of the mortgage defaults in the US. And so credit dries up and the banks that need it quickly, like Northern Rock, get into trouble.
The propensity of consumers to carry on shopping, especially for discretionary items, is heavily dependent on high levels of confidence. In this regard, recent events have not helped: rising interest rates, uncertainty about house prices, those queues at Northern Rock, political uncertainty – all have eroded consumer confidence. Moreover, there is no sign of a significant change for the better coming from any of the economic forecasters.
This makes the recent retail sales figures particularly hard to understand. Indeed, I’ve found them hard to understand ever since I became involved in retailing. They might as well be based on yurt sales in Mongolia for how they reflect what I’ve seen in my own shops. Maybe I’ve been missing the point all these years – if so, perhaps someone will write and put me out of my misery.
But, given a choice between believing what the statistics office tells me and believing the evidence on the shopfloor, I know which I will choose every time. And, right now, I think retailers are facing a threat from falling confidence among customers.
So what can we do? Well, the normal antidote for reluctant customers is to strengthen the value proposition. By this, I don’t mean last-minute price-slashing in December. It seems to me that such a move reflects the retailers’ loss of confidence – or, dare I say, panic – and the discounts usually comes too late to rescue a bad Christmas anyway.
Momentum for Christmas trade is built in November, before stress and urgency close consumers’ minds to considered shopping. In November, there is still a chance for your message to be heard over the babble of seasonal advertising.
So if you’re worried about the safety of your Christmas sales budget – and you probably should be – act now to offer greater value and so shore up your customers’ confidence to spend with you.
Simon Burke, chairman, Superquinn and Majestic Wine
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