We're dreaming of a tight Christmas

Published on Wednesday 12 November 2008 09:03

THE run-up to Christmas is the most important period for most retailers, who rely on bumper sales to make up a large chunk of their profits.

But for many shoppers and retailers, there seems a distinct lack of festive cheer this year. Consumers are keeping a close eye on their wallets as the cost of living rises and credit firms restrict spending. A survey by advisory firm Deloitte today found Scots expect to spend 16 per cent less on Christmas presents this year.

This is bad news for most high street shops. John Lewis recently reported a 4.5 per cent drop in sales at its Edinburgh store compared to last year. And a quick trip down Princes Street shows shops are already relying on promotions and discount offers to tempt customers in.

At the same time they are facing increased competition from online stores, as hard-pressed shoppers bypass the high street in their search for bargains. Spending on the internet is predicted to rise by 15 per cent this year, according to the Interactive Media in Retail Group.

Jim Boyle, retail partner for Deloitte in Scotland, said: "There is no doubt that falling house prices and rising food, energy and transport costs, together with increasing fears in the employment market, have impacted on consumer spending for much of 2008.

"And while Christmas is not about to be cancelled, a recession will mean that for the first time in 15 years, retailers will face a much thriftier public as consumers become increasingly price-sensitive."

Scottish consumers are expected to spend an average of 709 over Christmas – 16 per cent less than in 2007. Overall it's expected 690 million will be spent on food and drink, a 19 per cent decrease on last year – losing Scots their position as Britain's highest Christmas spenders for the first time in three years.

People who rely on credit cards to pay for the celebrations may find it more difficult this year, as companies are cutting back on lending. And many store cards have hiked their interest rates, with some charging 30 per cent a year.

This tightening of purse strings is reflected in the dismal news from the high street. New figures show that UK sales have fallen 2.2 per cent on last October – the worst results for more than three years. While food and drink sales have risen, clothing and footwear remain poor, and home goods and furniture are significantly down on last year.

Stephen Robertson, the British Retail Consortium's director general, said: "These are seriously poor numbers, especially in the run-up to Christmas. For the first time in more than three years, retail sales fell into negative territory – further evidence of how difficult trading conditions are for retailers.

"These are tough times for families and retailers, who hope the Bank of England's bold interest rate cuts will provide a much-needed boost."

But Graham Bell of the Edinburgh Chamber of Commerce said it was not all "doom and gloom", although city centre shops were having to work harder. He said retailers were trimming costs and offering discounts to tempt shoppers back.

"Christmas is make-or-break for most retailers," he said. "They always depend on a good Christmas to make the figures for the year.

"I don't think we should talk about universal gloom. In the present market, it would be fairly normal if people were hanging on to their money to see what bargains they can get. But we are less down than a month ago, and the figures are coming back.

"The biggest problem we have is confidence has been undermined."

Fiona Moriarty, director of the Scottish Retail Consortium, said shoppers with cash to splash could expect good deals.

She said: "It's a great time to be a shopper. The high street is extremely competitive at the moment. We'll see many retailers offering price promotions that will continue throughout the run-up to Christmas."

She said many stores would also benefit from the rise in internet shopping. "Pretty much every high street retailer has an online presence, and this is having an increasing importance," she said. "Customers are going to do price comparisons on the internet before buying."

Edinburgh City Council has been trying to boost the city centre's economy by introducing free parking after 5.30pm and on Saturday afternoons for November and December. Traders in Leith Walk will enjoy a respite when tram works are suspended over the festive period.

Rob Winter, a spokesman for the Princes Street Traders' Association, said retailers were prepared to cope with the tough times. He said: "It's going to be a difficult six weeks. Christmas shopping has been getting later and later for the last few years.

"However, we hope shoppers will keep an eye on what's happening in the shops. There are going to be some very good offers and incentives on Princes Street.

"Every survey shows that people are looking to spend less money, so they'll be wanting better value for their money."