As retailers release their Christmas trading statements we find that, as a whole, shoppers have been cautious in their spending. Yes, consumer confidence had increased in the months running up to Christmas, but the fact remains that, with inflation outstripping the pace of wage growth, shoppers have less disposable income to spend. They have been sophisticated in their approach to shopping, investing where they perceive genuine value and waiting for retailers with a track record of pre-Christmas discounting to put up the red tickets.
Within this challenging trading environment, we have seen significant polarisation in performance. Retailers like Next and John Lewis, with their clear promotional strategies, strong product and leading multi-channel offers have performed well. Likewise specialists with desirable ranges, distinct positioning and excellent customer service, including Kurt Geiger, The Fragrance Shop and Ted Baker, have reported robust trading. In general merchandise it’s been large players M&S and Debenhams that failed to deliver. Both of these retailers aggressively discounted before Christmas – a move which seemly failed to deliver necessary volume uplifts – suggesting areas of weakness in ranges and, we suggest, a fragmentation of spending among shoppers to a wider selection of specialist retailers.
The most alarming of this year’s results have come from the biggest food retailers. Sainsbury’s reported marginal (0.2%) like-for-like growth. Tesco and Morrisons saw their same store sales fall by 2.4% and 5.6% respectively. In part this can be attributed to a flat market performance, but the big four have also needed to contend with growing competition at both the top and bottom ends of the market. Discounters Aldi and Lidl continued to storm ahead, benefiting from growing store numbers and improving shopper perceptions. At the other end of the spectrum Waitrose and, to some extent, M&S Food enjoyed uplifts as many shoppers traded up for their main Christmas shop.
2013 Christmas themes
Retailers’ advertising campaigns typically took a more aspirational stance than in 2012, suggesting an air of cautious optimism. However, many failed to hold their nerve, with discounting creeping into stores in mid-December as they attempted to boost footfall in the weeks running up to Christmas. Unsurprisingly after the past couple of years, shoppers now expect discounting before Christmas from certain retailers and therefore held off buying presents. This has created what has become a toxic profit-eroding cycle for those retailers involved.
Multi-channel was a major theme this Christmas. Early official figures suggest that up to one-fifth of Christmas sales were made over the internet and retailers across the board have reported strong uplifts. The proliferation of click and collect services, improved retailer websites and growing shopper use of smartphones and tablets all helped boost online sales. Crucially it was the retailers that delivered the most seamless multi-channel offer that performed best this year.
In part the growth of multi-channel was related to a wider trend for shoppers seeking the convenience offered by online retailers. Indeed, among the leading grocery players we have also seen strong sales uplifts from their convenience store estates.
Social media played a more important role this year. Growing activity on Facebook, Twitter, YouTube and, increasingly Pinterest provided inspiration and ideas, and directed shoppers to stores and transactional websites. Notably we saw a maturity of social media this year, with activity more closely aligned and integrated with broader marketing strategies and less focused on PR generating gimmicks. Social media was also closely linked with TV advertising. Use of twitter hashtags and previews of adverts on YouTube had retailers such as John Lewis and Sainsbury’s seeing their ads go viral and trending across social networks.
It is clear that increasingly savvy shoppers were the main winners this Christmas, benefiting from shopping around, researching online to find the best bargains and sharing money saving tips between friends using social media.
Savvy’s full Grocery Christmas Review and Outlook for 2014 is now available in PDF format. To receive a copy, please contact Caroline Kay on 0113 237 6500.