Well it’s proving to be an online Christmas for sure. EDigital Research forecasts that 87 per cent of shoppers will buy online this festive season, which certainly supports what we are seeing in our peak period, with online sales growing strongly throughout November and into the first few weeks of December, to levels well above last year.
Our own online sales have climbed to comprise nearly 40 per cent of our total sales during this time, up from 27 per cent last year. We have seen customer confidence in the online world rise as broadband penetration grows, sites become more responsive, service improves and the delivery promise can be trusted. So why wouldn’t you do your Christmas shopping from the comfort of your own home?
And what of the new year? The cheer before Christmas is forecast to turn into a very different mood, with aggressive discounting on the high street in January.
I don’t think it will be unusual for the discount percentage to be in the 70s, which should be great for customers, while not great for retailers’ margins. But it is necessary, as everyone attempts to clear the decks before bringing in the spring/summer ranges, which we all hope will stimulate much-needed customer demand before Easter.
Littlewoods is feeling slightly more confident than many of the commentators, because history tells us that a tightening of the economic belt has a greater impact on the high street than home shopping.
Companies such as Littlewoods may even be winners in this market, as customers who find it difficult to obtain credit from banks and card firms that have become jumpy about lending look to home shopping. These shoppers are attracted by the flexible payment options – not to mention the convenience.
There certainly appears to be two schools of thought for the economic climate in 2008. Firstly, the pessimists, who are forecasting a 1970s meltdown (it’s easy to talk yourself and customers into a recession). Secondly, the optimists, who believe that likely further interest rate reductions will boost consumer confidence in time and encourage customers to spend again by late summer.
The latter, however, will still mean retailers need to batten down the hatches from a cost perspective between now and then – and that’s the optimists’ view.
Whatever happens to spending, I think service and value for money are going to play a bigger part in differentiating retailers from each other. If customers do have less money, they will be more choosy how and who they spend it with.
So two wishes for the new year: for the Monetary Policy Committee to act quickly – it takes many months of lag before customer confidence matches the rate cuts; and for a spring-like spring and a real summer… So, now imagine how the retail landscape could look by the autumn.
Merry Christmas.
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