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Cold climate for retailers

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Christmas shoppers are starting early and hunting for bargains

How much will the economic situation affect spending this Christmas?

Consumer confidence is very fragile as we approach this festive season. Our annual Christmas Shopping Survey found that 53% of the population expect the economic climate to impact their spending greatly, which compares to only 45% last year.

More than four out of ten people we questioned expect to have less money to spend than last year, which itself was a rather gloomy year with 37% expecting to spend less than 12 months previously.

One respondent among our TrendSpot online community pithily summed up the mood: “I started today and intend to finish tomorrow. Less money means fewer choices, therefore easier shopping.”

Bad weather was blamed for poor sales in 2010, is it influencing purchasing habits this year?

With heavy snow predicted again in December, people appear to be starting their present buying earlier to avoid the weather disrupting their plans. Some 31% of those surveyed said they were preparing to begin shopping earlier than last year.

However, the earlier rush to the shops is not entirely linked to weather worries. Lower economic confidence appears to be changing purchasing habits this year, with many reporting they are shopping earlier to try and hunt out bargains and some cutting back on sending Christmas cards.

How much are people expecting to spend this Christmas?

They may complain of having less disposable income but shoppers told us they each expect to spend £307 this year on presents, food and drink, which is actually £7 per head higher than they predicted at this time in 2010.

If that pattern plays out uniformly across the 35 million or so people of working age in Britain, the result would be a boost to total high street spending of around £343 million compared to last year.

Then, there was a big reduction in spending among the over-25s, the group which accounts for the majority of retail sales, but in 2011 they appear to be loosening the purse strings. The older group are planning to splash out £312 per person, a big jump from the £287 they anticipated at the same point last year.

In contrast, under-25s each intend to spend £185, down £4 per head from last year’s expectations.

One thing to bear in mind with all these predictions is that that our post-Christmas survey shows that people always spend more than they expected to.

What is the outlook for online shopping?

In 2011, we are seeing a swing in sentiment away from online spending towards the high street –the first year expectations have reduced around internet spending.

Consumers expect to spend £7 each less online and £14 more in stores, which represents a ‘swing’ of £21 away from online towards high street spending.

There is a general disappointment with online service that is a hangover from last year and it is affecting people’s plans for this year. I would still expect online sales to continue their overall year-on-year growth, but online retailers need to do a lot of work this Christmas to win back customers’ trust.

Of those who say they won’t be spending online at all, 40% made clear it is because they worry products won’t be delivered on time. In 2010 a smaller proportion, 29%, were concerned about that – but one in six online shoppers failed to receive at least one present by Christmas Day.

Our survey this year also found that 36% were nervous about receiving the wrong present, more than double the figure in 2010. Again, bitter experience explains why there has been this shift in sentiment because 11% got an incorrect item or something they were not expecting last Christmas.

What does this mean for internet retailers?

Quite simply, they have to get their act together this year and outperform to win back a sceptical public.

While 81% of the population saying they expect to shop online for gifts seems an impressively high figure, it is well down on the 89% who had planned an internet Christmas in 2010.

However, there is still a big appetite for mouse-based shopping and 20% of consumers said they would have spent more online had it not been for experiencing frustrations with ordering and delivery.

If online stores perform well they will pick up significant market share but if there is a rerun of 2010 then expect to see stores outperform last year’s figures. In that scenario, the big winners are likely to be supermarkets and high street chains.

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