High street Christmas set to be blue

Friday 7th November 2008

High street sales are set to record zero per cent growth this Christmas.

Data from Mintel point to a real terms fall in sales – compared to an average growth rate of five per cent each year since 2000.

Some 41 per cent of Brits polled said they will spend less this Christmas than they did last, compared to 22 per cent of people who in 2007 said they would rein in spending.

"There is always a lot of emotional pressure to spend money and spoil everyone over the festive season, and during the years of unprecedented boom time, many Brits enjoyed lavish Christmases," Richard Perks, director of retail research at Mintel.

"But this year, as budgets tighten, Christmas will become a much less indulgent affair."

With shoppers holding tightly to their wallets, early sales and heavy discounts are expected.

"Many retailers will be looking for ways to encourage people to part with their cash and so we are likely to see discounting and end of year sales start before Christmas," Mr Perks said.

"But it is not all bah humbug as the younger sector is still relatively buoyant. Companies targeting this end of the market, such as Topshop, Primark and H&M, have managed to hold their own during these tougher times."

Retail traffic index figures from Synovate Retail Performance show the number of non-food shopping trips in the UK fell by 3.1 per cent in October compared to the same month in 2007 and by 1.3 per cent against September 2008.

Allowing for Easter adjustments, this is the first month since November 2006 that all regions across the UK have registered a year-on-year decline in shopper numbers.

Tim Denison at Synovate said: "The accumulation of bad-news stories over the course of the month, from the widening exposure and realisation of the financial market turmoil to growing concerns over job security appears to have had an impact on the high street in October, rocking confidence and shopping patterns.

"Some retailers sprang so-called 'mid-season' sales to stimulate sagging demand, but despite them shopper numbers were down by 3.5 per cent in the first week of the month against the corresponding week of 2007."

He added some fundamental changes were occurring in shopping behaviour – and not just people spending less on non-essentials, switching more to own-label basics and moving allegiances from middle market to value chains.

"For some people, shopping is not the enjoyable social pastime it was hitherto. It has become more of a frustration, where their eyes and hearts alight upon goods that have now become unaffordable to them," Dr Denison.

"For this minority, their number of recreational shopping trips and their discretionary spending patterns in the shops has been curtailed because of the way it now makes them feel."

He added those buying high ticket items, such as white and grey goods, were more likely to be buying to replace rather than trading up.

The Synovate prognosis for Christmas – matching that of Mintel – is for November and December to be quieter than last year.

However, Dr Denison said: "With petrol prices - one of the more noticeable pulls on the purse strings - on the wane and interest rates set to fall further, shoppers may decide that spending, where bargains are to be had, might seem more sensible than saving, particularly in light of current attitudes to the banking sector."

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