Christmas 2014 – the challenges ahead

The festive season is upon us again. For many businesses, this period is crucial as shopping centre and high street retailers await the outcome of what are traditionally their busiest weeks of trading. There is still uncertainty in the retail market due to the closure of more high street brands in 2014 and the ongoing profit battles of the ‘Big 4’ supermarkets. Online retail also continues to compete for more market share over physical stores with forecasts for more online retail records this Christmas. Last Boxing Day saw a staggering 129 million online visits to retail websites and this year analysts forecast that this record will be beaten for the seventh consecutive year.  Richard Ralph, Associate Director in DTZ’s Retail Management looks at the challenges facing retailers this Christmas.

Online Shopping

Online shopping over the years has become easier, faster and in many cases cheaper than shopping in physical stores.  According to DTZ Research’s recent E-tailing report, the UK has the most mature online retail market in EMEA with 15.7% of total retail spend is expected to be spent online by 2019. For many busy consumers this platform is ideal, with research showing that smartphone and tablet platforms account for a large percentage of online shopping.  Consumer confidence in this technology is increasing year on year with orders being placed closer to Christmas as efficiency in deliveries increases.  However online-only retailers can struggle with loyalty due to the ease of ‘shopping around’ and the lack of human relationships that you would get from a friendly sales assistant but retail giants such as Amazon have proven that price and a vast selection of products can win over a customer and a large chunk of the market share.

Offline Shopping

In order for the high street and shopping centres to compete in this competitive and efficiency driven era the notion that shopping is ‘entertainment’ must be reinstated as leisure is a key driver for footfall.  Shoppers need incentives to venture to the high street or out of town malls as many may have cheaper online alternatives. A number of shopping centres managed by DTZ are continuing the tradition of having a grotto or ‘Light Switch On’ event for children as a way to drive footfall. This turns offline shopping into a family event which online retailers cannot compete with.  For many shopping centres these events are vital due to the expectations of the local shoppers and continuing brand reputation.

One compromise which has worked out well for retailers which operate both online and offline is offering customers a click- and-collect service. Click-and-collect has been important for both retailers and landlords in 2014, forming a key component in a retailer’s omni-channel strategy. It offers a good solution for all parties – it is convenient for the consumer; it cuts out the retailer’s expensive final mile and avoids non-delivery; and the retail landlord benefits because a physical store is still used. Spending via click-and-collect is expected to grow 82% from £3.6bn in 2014 to £6.5bn in 2019, with clothing and electricals being the two dominant sectors.

Boxing Day and Sales

One trend in retail which does go against tradition is the popularity of Boxing Day trade. Ten years ago a fair percentage of retailers would have remained closed for this day as it was traditionally one for visiting families and staying at home. In recent years though, probably thanks to big ‘sales’ giants such as Next – Boxing Day is a serious trading day. The January sales have become a thing of the past as most retailers begin their sales on Boxing Day and some even before Christmas. During one recent Christmas, the department stores displayed two opposite sides of the spectrum: Debenhams began reducing stock in early December due to too much excess stock whereas John Lewis refused to reduce stock until after Christmas to reiterate their reputation as a quality brand.

Last Christmas was particularly challenging for some retailers as poor weather led high street footfall to decrease by approximately 5% whilst shopping centre footfall was also down by approximately 2%.

Whatever the main outcomes are this Christmas let us hope retailers will thrive and a more stable and confident 2015 lies ahead of us.