High inflation rather than strong volumes to drive Christmas spend this year, figures claim

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Non-food retailers will continue to struggle this Christmas with sales expected to show year-on-year growth of only 1.2% in the fourth quarter, according to figures from GlobalData.

Volumes are forecast to fall by 0.1% as price rises, which came into play as result of the weakened pound, will discourage cash strapped consumers from shopping over the seasonal period, the company adds.

Weak sales in early Q4 may entice more retailers to take part in Black Friday this year, although this runs the risk of bringing forward sales that would have otherwise been made at full price. This will be particularly true for retailers which operate in more challenging markets, with those that sell homewares (which although in the past have been more reluctant to discount their homewares assortments over Black Friday), expected to participate in the event on a larger scale this year, GlobalData notes.

Although electricals have strong Christmas gifting potential, increased prices will deter consumers from buying this category over the festive period, particularly considering consumers’ real income continues to decline, meaning shoppers may opt to trade down this Christmas, GlobalData suggests. Furthermore, as Black Friday becomes a more established event in the British retail calendar, a higher proportion of those who plan to buy electrical goods as presents may purchase these on offer over the Black Friday period, pulling forward Christmas spend at lower prices.

Despite overall sales expected to be tough for electricals over Christmas 2017, GlobalData does predict certain categories are forecast to grow year-on-year. Strong gifting sales are expected in the home audio market, fuelled by the increasing demand for smart speakers. Although the Amazon Alexa was launched in time for Christmas last year, a second generation model has been released since. Furthermore, Google released its own smart speaker ‘Google Home’ in March 2017 and a mini version in October this year, further encouraging sales in this category.

As retailers continue to educate consumers on the benefits of ‘smart living’, more consumers will be adding smart appliances to the top of their Christmas lists, GlobalData believes.

The online channel will continue to outperform physical sales growth with online pureplays such as ASOS and Amazon set to be the winners this Christmas, drawing consumers online with their vast product offer alongside fast and low cost delivery propositions, GlobalData adds. The company also notes that the increased availability of delivery saver schemes this year, alongside express delivery options being widely accessible, will encourage shoppers to leave online purchases later, having the confidence to purchase right up until the last few days before Christmas.

Newly introduced ‘try before you buy’ delayed payment options being offered by clothing & footwear retailers such as Topshop, H&M and ASOS will further entice shoppers online over the Christmas peak as budgets are constrained by the rising costs of essentials and consumers look for convenient ways to manage their spend.

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