Retailers ‘cautiously optimistic’ for Christmas shopping despite cost of living pressures

Retailers are cautiously optimistic that consumers are ready to embrace holiday spending this Christmas despite rising cost of living pressures but it will be down on previous years, according to new research.

The 2022 Deloitte Retailers’ Holiday Survey assesses sentiment for the approaching Christmas period and identifies expectations for the following year.

The results showed 67 per cent expected to grow sales over the Christmas period, down from 80 per cent last year.

A further 58 per cent expected consumer confidence to deteriorate through next year.

Other key survey findings include:

  • 24 per cent say December is their critical trading period, down from 37 per cent in 2013;
  • 58 per cent are confident their logistics teams will meet demand, up from 29 per cent last year;
  • 43 per cent predict this year’s margin growth will be flat;
  • 45 per cent expect online sales above 10 per cent, compared to 55 per cent last year; and
  • 48 per cent say data privacy is a high risk for their business as a result of increased customer data collection.

Deloitte’s national leader for retail, wholesale and distribution Melissa Dean said in the past 10 years there had been more fundamental change in retail than ever with the promise of e-commerce.

“It saw the explosion of online retail goliaths and created a booming fulfilment industry. It saw the world reconsider what real-world retail stores are for,” she said.

“As retailers begin to look past Covid-19, there is a sense that technology, innovation and new business models will allow the industry to capitalise on emerging consumer behaviour and take a big step forward toward defining what the future shopping experience will look like.

“Despite the current economic uncertainties, the Australian consumer still loves to spend and by accompanying customers along their journey and adapting to their shifting needs, retailers will be well-placed for a strong holiday period and beyond.”

Australian Retailers Association chief executive Paul Zahra said the Christmas quarter was the most critical, with many stores making up to two-thirds of their profits.

“As retailers ramp up preparations for their busiest time of year, the mood is upbeat but questions remain over the severity of the cost of living challenges and how that will impact consumer spending over the festive shopping period,” he said.

“Despite the uncertainty, retail sales have been on a record-breaking run over the first half of this year.

“Consumers have continued spending in the face of rising interest rates and inflationary pressures, which haven’t had an immediate impact on spending.

“The concern is that it takes some time for those factors to wash through the economy, so we could see some belt tightening and a softening of sales as we head into 2023.”

Mr Zahra noted when households were under financial stress, discretionary purchases were the first to be slashed.

Heading into Christmas, he said labour shortages remained the biggest issue, with more than 40,000 job vacancies in retail.

“Many businesses are struggling to trade at their full potential because they can’t get enough people to fill shifts,” he said.

“It means the recruitment of Christmas casuals will be a difficult one, as businesses are already struggling without the high demand of the festive season.”

The research comes after it was revealed last week that Australians were cutting back on luxury items and looking for bargains as they battle rising inflation, according to the National Retail Association’s consumer sentiment report.

Almost half of shoppers surveyed said they were feeling confident about pre-Christmas sales, with one in five planning to outspend last year.

Data also revealed 71 per cent of consumers had changed their spending behaviour due to inflation.

“Consumers are feeling the impacts of continued interest rate rises and are acutely aware of the impact of these inflationary pressures on their hip pocket,” the report read.

“This is driving a significant shift in consumer spending habits, with consumers reporting that they switched brands more in 2022 than at any time since the pandemic began.”

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