ARA Retail Expectations Survey
ARA Retail Expectations Survey respondents covered the following retail categories – food, household goods, apparel/footwear, recreational, hospitality and department stores.
49 percent of respondents expected store traffic to be better or the same as last year while 51 percent were expecting store traffic to be down.
Despite the economic downturn, 43 percent of respondents remained optimistic about trading over the Christmas period saying they expected trading to be the same or better. Over 59 percent of retailers who were optimistic about the 2008 Christmas trading season expected sales to increase by between 10 and 20 percent.
“Our research shows experienced retailers understand retailing works in cycles and this downturn in retail trade has come off the back of the most successful Christmas trading period in a decade,” says ARA Executive Director Richard Evans.
“So for over 48 percent of retailers to be expecting store traffic this Christmas season to be the same or better than last year, shows confidence and an understanding of economic peaks and troughs within the sector.”
57 percent indicated they expected sales to be down on last year for a number of reasons. These included the increased cost in living, interest rates and petrol prices over the past 12 months. However, when respondents were asked whether the Government’s $10.4 billion stimulus package would help their businesses, just under half indicated it would improve their sales.
“The Rudd Government’s stimulus package will have landed in consumers’ pockets by December 8. Over the past couple of months, interest rates have been rapidly reduced to their lowest since December 2003 and petrol prices are on the decline. This means there will be an influx of cash in pockets for the holiday season. Retailers have been suffering all year and now they’re anticipating consumers will embrace the gift giving spirit of Christmas,” Evans points out.
Pre and post Christmas sales and advertising:
Retailers have had a tough year and are working hard to boost consumer sentiment and give shoppers the confidence to spend responsibly this Christmas. Shoppers can expect to pick up a few bargains in the lead up to Christmas with 43 percent of respondents said they planned to hold pre-Christmas sales this year. Consumers who wait until after the break can expect the usual array of bargains with 52 percent of retailers planning to have a sale after Christmas.
With one exception all respondents indicated they were using marketing and promotional activities to maximise their sales over the Christmas period.
“Retailers will be using point of sale promotions (over 61 percent), giveaways and competitions (over 25 percent) giving shoppers some good deals to fill those Christmas stockings. They are also investing in promotions and marketing campaigns in the lead up to Christmas with 67 percent planning print, television and radio advertisements,” Evans explains.
Staffing:
48 percent of retailers pointed out they were hiring additional staff for the Christmas period. With 53 percent stating they used word of mouth while 34 percent relied on in-store signage as the preferred method for recruitment. Other methods used were the usual newspapers, employment websites and employment agencies.
Impact of economic conditions:
The survey also sought to identify the factors likely to impact upon the profitability of retail businesses. The cost of goods and services together with the exchange rate had already impacted upon 75 percent of respondents. Of those respondents 80 percent indicated the cost of goods had affected their profitability by up to 20 percent with 10 percent stating it was between 20 and 30 percent.
The exchange rate will also have an impact upon the profitability and again is a similar order to the cost of goods.
Deloitte ARA Christmas Retail Survey
The ARA together with Deloitte has again produced the 2008 Deloitte ARA Christmas Retail Survey to determine consumer spending patterns for the 2008 Christmas trading period.
Following a bumper year in 2007, two thirds of the respondents said that they intended to spend the same amount on gifts as they did last year but intended to be more selective with the type and style of the gift they purchased.
The majority of respondents were aged between 18 and 40 years with 60 percent being female and 40 percent being male. The salary range of respondents was varied. 48 percent said they earned more than $71,000 a year, 26 percent earned $51,000-$70,000, while only 17 percent were in the $31,000-$50,000 bracket.
Time for shopping:
More than half (57 percent) indicated they planned to do their shopping in December. This was in line with last year. A quarter planned to start their Christmas spending in November which again was similar to the previous year. However 27 percent still intended to leave their shopping to the last minute making their first spending trip in the week leading up to Christmas Day. This was up on last year’s 20 percent. The early bird consumer who started shopping in October accounted for approximately eight percent of shoppers.
A substantial majority intended to complete their shopping in December but 15 percent stated they would continue their Christmas shopping after Christmas Day. This figure was much higher than in 2007 when it was nine percent.
Christmas spend:
According to Evans, retailers are optimistic about solid sales during the holiday season, although growth may not be as significant as last year’s decade-strong Christmas trade.
“The constant ‘gloom and doom’ messages from analysts about the state of the economy have lead to over 62 percent of respondents mistakenly believing Australia is in a recession at the moment, Evans says.
“Despite an overly negative outlook on the economy at large, shoppers are still ready to open their wallets this Christmas with over 55 percent planning to spend the same amount of money as last year on Christmas gifts and over 12 percent planning to spend more.”
Over 32 percent indicated they would spend between $501 and $1,000 on Christmas with a further 31.2 percent spending between $251 and $500.
This year however the spending on big items over $2,000 was down from 3.1 percent last year to 1.8 percent. The percentages in the other ranges were similar to 2007.
What is different in 2008 is the number of consumers who will purchase during or after Boxing Day to benefit from the post- Christmas sales. Almost one fifth of the respondents indicated they would spend between 10 percent and 40 percent on their presents in the post Christmas sales with 3.3 percent stating they would delay all of their purchases until after Christmas Day.
This was up from two percent last year. Many planning to shop after Christmas said they were delaying purchases because they believed there would be better bargains available after Christmas.
Presents:
In the traditional gift area books accounted for almost one fifth of responses followed by clothes/shoes, music/CDs, videos/DVDs, cosmetics/perfumes, jewellery, entertainment tickets and sporting equipment ad sportswear.
Electrical:
In the electrical goods area MP3s/iPods rated highly with 14.7 percent of consumers indicating they intended to purchase one. More than 27 percent planned to buy electrical appliances for the household. Nintendo Wii was also a popular choice followed by computer games.
Toys:
Outdoor toys, board games and the traditional gifts such as dolls, toy cars and trains were high on the list.
Other:
Gifts vouchers and travel vouchers were again very popular. Another interesting gift choice was a voucher for home services such as cleaning.
Where the consumer intends to shop:
Half of the respondents indicated they would do their shopping in suburban shopping centres while 35.6 percent intended to purchase most of their gifts in the Central Business District with only 3.6 percent using the local store or strip centres and five percent shopping online.
Factors affecting the Christmas spend:
More than half of the respondents believed the economy was in recession and that was likely to deteriorate further in 2009. A quarter of respondents indicated they were looking for price value promotions in the current economic climate. “Buy one get one free” and similar promotions were likely to increase the spend.
Results from the survey also revealed increased opening hours and additional staff in stores would encourage consumers to spend more during the Christmas season. However crowded stores and long queues followed by lack of service and the unavailability of products were the most frustrating aspects about Christmas shopping.
Conclusions
Retailers have reason to be cautiously optimistic about the 2008 Christmas trading period. Consumers will still spend this Christmas with much of the spend coming in December. Given the economic climate consumers will be a lot more discerning this year and will seek out price and value. They will also be looking for service, particularly in the final weeks when time will be of the essence.
