Retailers: what to expect from Christmas 2017

RetailStore founder Ian Tomlinson provides his insight into expected consumer trends ahead of Christmas 2017

Retailers across the UK are wondering what’s in store for Christmas 2017. A period of consumer uncertainty influenced by the political economic impacts of Brexit – devaluation of the pound against the Euro and Dollar – as well as National Living Wage increases, Apprenticeship Levy, and the rising costs from business rate increases, has put a great deal of pressure on retailers to manage costs more effectively and protect bottom-lines.

But during a challenging and problematic year for British retailers one thing that is certain has been their resilience to withstand hard economic and unpredictable times. A recent survey by Barclays bank on Retail Confidence has suggested that this year’s Christmas trading is however not all ‘doom and gloom’.

Consumer confidence

British consumers turned slightly glummer in November as they remained downbeat about the economy. November’s monthly consumer sentiment index from market research firm GfK slipped to -12 in November from -10 in October, falling to its lowest this year for the second time. As the festive period approaches however, new Barclays research suggests that 71% of retailers expect their outlook to be as good or better than last year’s Christmas trading period, although over 40% believe consumer confidence will have a negative impact on their Christmas trading.

In addition, 49% of UK retailers expect Christmas revenues to grow this year compared to last year and 82% of retailers expect the festive revenue to be as ‘good as or the same as’ last year. With the recent higher inflation this year, higher prices and real-term growth will contribute to retail revenue growth of around 5% from the previous year, adding nearly £4 billion to holiday sales and taking the seasonal total to £78.7 billion according to the Office for National Statistics. This suggests that this Christmas period will not be overly affected by the latest consumer sentiment index findings.

The rise of the gift card

New research from the UKGCVA suggests that gift cards and vouchers are a growing valuable source of revenue for retailers. Not only do gift cards offer consumers a convenient form of gift purchasing that offers choice of purchasing decisions for whom the gift is for, but many gift cards managers argue that the popularity of gift cards is rising and many retailers are failing to include this other form of revenue within the company’s wider marketing and sales strategies.

Latest research has found that gift cards offer businesses a valuable boost to their overall income. Those who purchase gift cards, almost all purchase for friends or family and would spend at least as much as they would usually when buying a traditional gift. In the survey, 72% of people who receive a gift card have said they would spend more than the value of card and make up the difference of an item with their own money. Adding on average £14 extra – 55% on top of the average value of the card’s worth.

As well as acting as another channel of revenue for the retailer, the survey also found that six out of ten consumers say they’ve been introduced to a new brand through a gift card, with 17% (rising to a quarter of those under 45) becoming repeat customers as a result. With this new research in mind should retailers be offering more support to gift card managers and the possibility of incorporating new ways to market gift cards during the festive season in order to further boost gift card purchases?

Growing importance of the multi-channel

This year retailers expect a higher proportion of their revenue to come from online sales compared to 2016. As consumers maintain their position for convenient shopping, UK retailers expect 30% of their Christmas sales to come from online channels including desktops, laptops and mobile phones. In comparison, physical stores predict 66% of festive revenue to come from brick and mortar. Additional sales growth expectations in online shopping via mobile phones is at 13%, which may be somewhat lower than expected given the convenience to shop on the go during this busy festive time.

But one thing that is clear from this new research is the importance of multi-channel retail operations. According to the Barclays report, UK retailers predict that 49% of their Christmas revenues will be multi-channel in 2017. The aim of multi-channel provides consumers with a holistic view of a brand of what to expect, that includes being able to return items hassle free and usually with free postage.

In tough economic times getting consumers to part with their money is difficult and as a result consumers are looking for a more meaningful brand experience. However, to create such an all-rounded brand experience is difficult for retailers and often requires some investment. With the right approach, however, retailers are able to communicate their brand effectively across all forms of channels with a seamless experience to the customer.