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The festive season is the busiest period of the year across Europe in terms of consumer spending, a time when shoppers traditionally splash out on Christmas gifts, food and drink.
However, the ongoing recession has brought rising unemployment and tighter credit conditions from banks over recent months, which means consumers may give more thought this year to how much they are willing or can afford to spend.
It’s not all doom and gloom, however. While it’s still possible Santa Claus may have to lay off some of his elves this year, there are also reasons to believe that consumers are keen to enjoy some jollity in the bleak midwinter of recession.
Some industry analysts argue that consumers are beginning to get tired of saving money. It’s over a year since the global economy took a downturn and consumers have been trying to reduce their debt, helped by low interest rates.
The holiday season may give them a chance to reward themselves for their restraint and splurge a little, spending the same or even more than last year. For those who’ve lost their jobs, however, or for those whom the financial outlook looks more precarious, the answer may be to give homemade or less pricey gifts.
Nevertheless, the broad trend across Europe is that most consumers plan to spend the same as last Christmas, as indicated by the latest survey from Deloitte’s, a global accountancy and consultancy organisation.
Festive cheer in Northern Ireland may be thin on the ground this Christmas as people remain in cautious mood about spending, according to latest findings from the Northern Bank’s Consumer Confidence Index. The survey indicates that while overall confidence remains flat, spending expectations have dipped slightly, which may see some belt-tightening by consumers this Christmas reported the Belfast Telegraph newspaper in October.
Across the border in the Republic of Ireland, consumers are also feeling the pinch this year, although traditionally the nation has been the biggest Christmas spender in Europe. According to Deloitte’s annual Christmas spending survey, 47% of all gifts are purchased in advance of the festive period in Ireland, with work colleagues being the first to be sacrificed when it comes to saving on presents. 41% of survey respondents said they’d spend less this year, and 47% will spend the same. Books remain top of the gift wish-list in Ireland, followed by clothes, gift vouchers and cash respectively.
It’s a similar story across Europe, where there are signs that consumers will remain cautious this Christmas. The Swiss are among those planning to cut back on spending this Christmas, according to a poll by consultancy firm Ernst & Young covered on Swissinfo on November the 4th.
It found men are planning to spend more than women, and the most generous age group is people aged between 36 and 45. Books top the list of the most popular presents this year, followed by vouchers or money, with clothing and CDs and DVDS coming equal third.
Britons too plan to spend significantly less this festive season than they did last year, including 15% less on presents, according to an autumn poll by GfK NOP. The survey indicates 20% of Britons are planning to spend less on presents this year, with only 10% planning to spend more. Not even close family members will escape the cutbacks with the biggest savings planned for presents for nearest and dearest. The only category which people plan to spend more on is food and drink. They are expected to spend £182 on food and drink this Christmas, compared to £140 last year.
Yet while UK brokerage company Broker Execution recently produced a report that is less than bullish about consumer spending this Christmas, an analyst told Reuters: “what we know from experience is that as the end of December approaches what people do can be very different to what they say and so the outcome may not be as disappointing as these results suggest.” It’s a view that would probably be echoed by many consumers.
As one contributor to a yahoo forum confesses: “I set a budget every year and never stick to it, always seem to spend more the closer it gets to Christmas, especially when the Christmas spirit takes over.”
Low interest rates mean some lucky consumers have been left largely unaffected or even better off by the recession. As shown by the recent Deloitte’s survey, UK shoppers will spend at least as much this Christmas as last year, despite the UK remaining in recession. It found people were not reining in their spending too much this Christmas, partly because of savings on mortgage repayments at a time of low interest rates.
However, it suggested consumers were shopping around more and were showing less brand loyalty than previously. “The increasing number of budget or own-label products has been a winner for the supermarkets who have also taken over from traditional high street chains as the country’s biggest clothing retailers,” said the UK head of retail at Deloitte, adding: “Now more than ever, non-food retailers need to focus on the relevance of their products and differentiation from their competitors.” While the total retail spend for the final quarter of 2009 will be just below the same period last year, the Christmas month will be slightly up.
At the same time, shoppers are becoming more clued-up about how they spend than they were 12 months ago. A GfK NOP spokesperson said: “Interestingly, our study shows that we are less worried about how we’ll pay for Christmas this year, with a one in ten drop in the proportion who are ‘more worried than ever about being able to afford the presents I want to buy this year’”.
This supports the view that the British are becoming a nation of bargain hunters and have learnt how to make their money go further. The spokesperson added: “What we’ve seen through this year is a real growth in what we call the ‘savvy shopper’ – the person who knows what they want to buy but then goes and finds if there is a deal on it.” The research also suggested that other cost-cutting retail trends were on the increase, with consumers mixing branded goods with own label products and even preferring to shop on their own rather than going out with family and friends and being tempted to spend more.
Another form of tactical shopping is to wait until the last minute in the hope of securing a bargain, an approach adopted by some Welsh consumers. The chairman of Cardiff Retail Partnership told the Western Mail newspaper: “Last year we had an okay November, followed by a quiet few weeks and then a manic last week before Christmas. Shoppers are quite canny, they know shops are going to be forced to put pre-Christmas sales on and they wait for it to happen before parting with their money. We are very likely to see the same again this year.”
And according to Ciao, a Microsoft shopping comparison site, Spain is the uncrowned “last minute shopping champion” of Europe, where one in four starts the hunt for presents on Christmas Eve. Many Spanish shoppers, both online and in the high street, finish their shopping just a couple of days before Christmas.
In the current financial climate, many consumers are turning to the internet to save money. Those who already shop online but are on a limited budget are becoming more price conscious. Among those watching the pennies in Britain, 80% say they will compare prices more often online, the highest rate of the European internet users surveyed by Twenga, a leading shopping search engine. By contrast, only 66% of cash-strapped Dutch will become more avid online price watchers.
The survey also indicated that the Italians are the most pessimistic in terms of spending intentions, with 50% saying they plan to reduce their budget this Christmas. The British also feature as among the most likely to be reining in their spending, with 43% saying they’ll be spending less in 2009 than the previous year, compared to 41% for Europeans in general.
Only 12% of British shoppers will spend more and 41% will spend the same as last year. The most upbeat consumers are to be found in the Netherlands, with only 31% saying they’ll be spending less. Despite their reduced spending, however, the British will still spend more online than their European neighbours, with a budget of €400 for Christmas, compared to an average of €314 for Europeans. Second in line in the big spenders stakes are the Spanish, with a budget of €364, while the Dutch have the smallest budget at €182.
The UK already leads the way in terms of online shopping across Europe. According to Euromonitor International figures, the online spend per UK consumer is around £320 per person per year. By comparison, Germans spend £156 a year online and the French spend £160 annually. Euromonitor International forecasts that in 2014, the UK’s internet retailing market will be worth £40.2 billion.
Earlier this year, UK supermarket giant Asda launched a dedicated online Christmas gift shop in response, it said, to customer demand, adding that 48% of shoppers bought gifts in September to spread the cost of Christmas. Popular items among online shoppers in the UK are books, DVDs and leisure travel, while the French are likely to shop for clothes, books and leisure travel. Books, clothing and event tickets are the most common items to be purchased online in Germany.
Meanwhile, a separate report, carried out for comparison site Kelkoo, suggested that British consumers were increasingly turning to the internet to shop for Christmas. It found that 20p in every £1 would be spent online this Christmas, a rise of 24% on the previous year, and predicted that 50% of purchases for Christmas will be made online by 2015. And recent figures from IMRG, a membership organisation for the e-retail industry, and Capgemini, a management consulting and IT services group, indicate the growing popularity of internet shopping over the last few months, with internet stores focusing on Christmas as a period of further growth. “The retailers that continue to expand and improve their online presence will no doubt reap the benefits during the festive trading period,” an IMRG spokesperson said.
The findings are backed by another survey, from e-business consultancy Logan Tod. It forecasts that UK consumers plan to increase their online shopping this year, and that increased satisfaction and rising ecommerce uptake from older demographics are driving online growth.
For Christmas 2009, 53% of UK adults intend to increase their online purchasing, and consumers will spend more with internet retailers who demonstrate better availability of products, effective search tools and smarter delivery options. 70% of UK adults cited previous good experience as a key factor in which sites they visited. Online attributes consumers listed in order of importance were: product availability information (71%), effective search tools (70%) and smarter delivery options (70%), with people happy to wait for delivery in return for a discounted price.
The research also indicated the wider use of search engines has been the key to driving traffic to sites. While social media was not a prominent driver this year, it did have a larger effect amongst younger audiences. Last year’s Logan Tod survey predicted that those in the 45-54+ age bracket signified the biggest opportunity for online retailers. This demographic has now become even more comfortable with online shopping and they represent the best growth sector, as over 60% of respondents from this group indicate they will buy more online this coming Christmas.
A spokesman said: “we can be sure consumers will buy more through the internet, but they are going to be shopping around more than ever before and demand better service. Intelligent retailers will be those who improve the overall customer experience, and who focus on the high growth demographics”.
Many of these online consumers will be doing their Christmas shopping at work, according to a survey conducted on behalf of ISACA, a non-profit association of 86,000 IT professionals. It indicates that half of those surveyed plan to shop online this Christmas using an employer’s computer, devoting an average of nearly two full working days (14.4 hours) to this occupation, although 10% plan to spend at least 30 hours stocking up for Christmas.
The general outlook for consumer spending this Christmas across Europe appears flat, with no dramatic dips predicted. However, as happened last year, sober intentions to rein in spending are likely to succumb to the festive spirit, particularly as many consumers may feel they deserve a blow out after a year of belt-tightening.