What to do if you’re a retailer struggling in the chilly economic climate? Simply start the holiday season early
THE LIGHTS ARE twinkling on the tree, Silent Night is playing on a loop and the holly and ivy are dusted with snow. And all in the first week of September.
The opening of Brown Thomas’s Christmas shop this week unleashed the usual complaints about the commercialisation of the December holiday season. But in the week that the Central Statistics Office (CSO) released another set of dismal retail sales figures, a more relevant retort might be: what is the point? The CSO data show that the value and volume of retail sales were down in July, with falls of almost 6 per cent recorded in sectors such as department stores, furniture and lighting. So with consumers “running out of steam”, in the words of one analyst, can they be tempted to open the wallets by a shop selling Christmas decorations on a sunny week in September?
“It is definitely worthwhile,” says Brown Thomas’s managing director, Stephen Sealey. “There are early adopters who spend a lot of their time decorating their home, especially in the current climate.”
Sealey points out that Brown Thomas has opened a store selling Christmas decorations each autumn for the past five years. “The only thing we’ve done differently this time is to issue a press release,” he adds, perhaps ruefully. In London, Selfridges opens its Christmas store in early August – a fact that is unlikely to cut the mustard with critics of Christmas arriving even before Halloween.
Regardless of your view, the event highlights the importance of the winter holiday in the annual retail calendar. For many businesses, Christmas and the sales season that follows can make or break them. Booksellers, for example, sell 60 per cent of their stock in the weeks before the holiday.
This Christmas could be crucial to the fortunes of many retailers who have been struggling with lower demand. Among the department stores, Clery’s is losing money, Arnotts has been taken over by the banks and Brown Thomas saw pre-tax profits fall 73 per cent in figures published earlier this year.
“Sales are positive on last year, but we’re having to work hard to get them,” says Sealey. “This month alone, for example, we have organised more than 200 customer events: they help add theatre to the stores and create a good customer experience.”
Yet caution remains the byword on consumer behaviour, according to Damian O’Reilly, a lecturer in retail studies at Dublin Institute of Technology. “We still have money, we’re still wealthier than we were 10 or 15 years ago, but we’re not spending it.”
The good news is that the decline in retail sales is bottoming out, O’Reilly adds, though the threat of a double-dip recession in the US remains a worry. “The bloodbath is over,” he says. “Small retailers will continue to go out of business, but many in the sector have restructured.”
At Dundrum Town Centre, shopper numbers are up 4 per cent, but getting people to spend remains a challenge. Two out of 120 stores are vacant, but manager Don Nugent says he has three offers to rent the premises. He says the centre is performing well in difficult economic times and explains the improvement in confidence in terms of the shoes shoppers buy. “A few years ago, shoppers were buying multiple pairs as the mood took them, but last year they were making do with the shoes on their feet. Today, we’re finding they are prepared to fork out for that second pair,” he says.
O’Reilly adds that the Government should be thinking about introducing a stimulus to unlock consumer purses and create jobs. In France, he says, the government cut VAT for restaurants and bars in return for employers creating more jobs in the sector, a move that seems to have stimulated demand.
This Christmas will see a big rise in online buying, O’Reilly predicts, as consumers seek value. Even in clothing, where returns on internet purchases can be as high as 50 per cent, shoppers have shown an increasing willingness to purchase online.
Big retailers have worked hard to develop their web presence and have exploited the social networking trend. Marks Spencer, for example, has 100,000 Facebook friends who want to know about its latest deals.
The last two winters saw huge discounting by retailers before, during and after the traditional Christmas shopping period. Some of this was due to overstocking, but aggressive competition between stores was also a factor. O’Reilly says retailers have been far more cautious about buying in stock and, as a result, the sales this winter will be more modest. Retailers agree. Sealey says Brown Thomas’s sales will be “as short and sharp as possible” after Christmas, and Nugent is predicting a short sales season at Dundrum.
Cross-Border shopping is unlikely to feature as strongly this Christmas as in previous years, mainly because of a strengthening of sterling against the euro and a narrowing of the VAT differential.
If you’re still annoyed by Christmas stores opening in September, remember: it could be worse. In the US, retailers such as Sears and Toys “R” Us have taken to organising “Christmas in July” sales to shake down customers during quiet periods.
