Strong Christmas predicted for High Street

Christmas 2009 is set to be far better than expected following a turbulent year for the retail sector.
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The latest KPMG/Synovate Retail Think Tank (RTT) white paper, entitled 'Christmas trading in the recession: the challenges and possible impacts' looks at the challenges faced and shows how retailers have adjusted tactics to maximise returns.

The RTT believes the new retail environment featuring tightly managed stock, adjustments to the levels of demand and emphasis on cost control, all set the tone for Christmas 2009.

The RTT predicts that, given Christmas trading has always been better than expected during previous recessions, there will be a solid performance in 2009.

Professor John Dawson said: “Having had a full year of doom and gloom, retailers and consumers have adjusted to some extent. Last Christmas it was all unknown – and it has turned out not to have been apocalyptic.”

Nick Bubb of Pali International added: “The huge Government stimulus launched at the end of last year is still working through and Christmas falls in a favourable window before the big payback begins, in the form of significant tax rises and spending cuts after the election.”

Margin protection is now the key business imperative for retailers and is more important than last year as less volume needs to be shifted, given the reductions in forecast sales.

Mark Teale of CB Richard Ellis said: “Given that the economic panic has subsided since last autumn, retailers will be less apt to be drawn into heavy discounting this year: Christmas will be less fraught.”

Richard Lowe of Barclays Retail & Wholesale Sectors added: “Last Christmas, retailers were going into it trying to move stock as quickly as they could, to generate cash and reduce their overall stockholding. This year stock is far ‘cleaner’ and they will be managing their margin very carefully.”

As a result of the lower forecasts, Januars sales will not be necessary to shift stock. Vicky Redwood said: “We noted last year that retailers suffered regardless of whether they cut prices or not – will this put some off slashing prices this year?”

The rise in VAT in January will require retailers to get their pricing and messaging tactics right both before and after the increase. Nick Bubb said: “It may simply be a zero sum game, but the most nimble - or desperate - retailers will try to shout loudest to try to steal a trading advantage.”

Due to the economic climate, this year is likely to be a 'stay at home Christmas', which in turn is likely to have a favourable effect on Christmas trading.

Helen Dickinson of KPMG said: “Last year, despite declining confidence, many consumers had already paid deposits on their regular winter holidays before the worst of the economic situation became apparent and went abroad anyway.”


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