Marketing

Fewer retailers expecting a merry Christmas: Deloitte

Retailers are bracing for a slower Christmas this year than last year, according to Deloitte’s annual Retailers’ Christmas Survey released on Wednesday.

Only 62 per cent of retailers expect to see higher sales this Christmas compared to last year, down from 80 per cent last year. Just under 40 per cent are expecting to see some form of Christmas period margin decrease.

David White, national leader of Deloitte’s retail, wholesale and distribution group, says retailers haven’t been this pessimistic since 2013.

“It’s clearly been a tough year for many retailers, with 47 per cent of our survey respondents telling us they’ve experienced flat or negative sales growth over the past 12 months,” White said in a statement.

“So it’s probably no surprise many are also approaching this Christmas with a little less cheer, certainly compared to last year.”

According to Deloitte, 39 per cent of retailers will be discounting pre-Christmas to help drive sales this year, compared to 31 per cent last year, and 30 per cent in early December.

Last year, many retailers were caught out by a 0.4 per cent slowdown in spending in December, following the 0.5 per cent increase in November when many consumers did the bulk of their Christmas shopping during the Click Frenzy, Black Friday and Cyber Monday sales.

The Australian Retailers’ Association last year predicted consumers would spend $51 billion between November 9 and December 26, a 2.9 per cent increase on 2017. The ARA has not yet released its Christmas spending predictions for 2019.

But results were mixed, with some retailers, such as David Jones recording modest gains over the peak period, and others, such as City Chic doing much better.

Online, customer service come to the fore

It’s not all bad news, however. Deloitte predicts digital will be a standout, with 58 per cent of retailers expecting to see growth of 10 per cent or more in online Christmas sales. Salesforce has predicted a 20 per cent increase in online sales this Christmas compared to last year.

Besides e-commerce, retailers are planning to drive sales through good old-fashioned customer service.

“Over a quarter of respondents highlighted customer service as the most important driver of sales this Christmas, just behind digital and omni-channel offerings,” White said in a statement.

“These two strategies aren’t mutually exclusive. Forming a strong digital connection with the consumer is critical to building trust in the brand, regardless of where the customer spends, and this connection to the customer flows through to loyalty.”

What will drive growth in 2020?

Looking ahead, 72 per cent expect to see positive sales growth in calendar year 2020, though most are forecasting growth of no more than 5 per cent.

“New products and online will remain key to growth prospects, and only 11 per cent of retailers are expecting to grow through new store openings, down from a peak of 43 per cent in 2017,” White said.

“Rising input costs following the depreciation of the Australian dollar are also expected to bite when it comes to margins, and respondents continue to look to the likes of property costs as levers to reduce bottom line impacts.

“It’s certainly critical that within the retail ecosystem, retailers, suppliers and landlords work together, rather than against each other.

“Ultimately, uncertainty kills confidence, and global economic turbulence certainly isn’t helping. Australian retailers will be waiting for a recovery in wage and jobs growth to provide a boost where interest rates and government tax cuts fail to provide the stimulus needed.”