Christmas 2016 and how we really screwed up retail’s key season

Christmas Shopping 2016 ZaraSo we’ve really screwed up the Christmas shopping and clearance sales season. haven’t we? OK, there are lots of consumer bargains out there but if we create a backdrop where so many retailers are on a knife edge, that can’t be good, especially in what should be the most profitable shopping period of the year. And the Boxing Day picture so far doesn’t make for happy ready with footfall to stores down 6% by mid-day (see further down in this report).

A report last week by business recovery company Begbies Traynor said nelly 22,000 UK retailers are in “significant” financial distress. Admittedly, around 20,000 were in that state a year ago and they haven’t all gone under since then. But this this year’s figure was a hefty 6% up and 97% of those stores are small and medium-sized. The quarterly rent bills due around now is likely to tip many over the edge.

Christmas Shopping 2016 Kate Spade saleSo how did we get here? Well, for decades in the US there’s been a thing called Black Friday, a perfectly logical kick-off day for the Holiday shopping season. The day after Thanksgiving when (a bit like Boxing Day in Britain) people were fed up of spending time the loved ones and wanted to get out for some retail therapy is a real thing in America not an artificial event layered on. In the US version, stores offered discounts to lure people in, but mainly that was designed to get them looking at all the lovely full-priced merchandise too.

So far so good. However, in recent years, the discounts started to become the be all and end all of Black Friday and as the event moved across the Atlantic to Europe (where previously the only notable event in late November was my birthday), Black Friday became purely a discount-focused shopping ‘season’. Interestingly, it became largely an internet-focused one too.

Christmas Shopping 2016 M&SSo what we had in 2016, compared to a decade ago, was a massive migration of Christmas shopping to the Black Friday period, a consumer determination to not pay full price for anything, and a move away from physical stores to online (a disproportionately higher number of Christmas gifts/supplies are bought online).

The result is bad news for stores and dampens shopping enthusiasm for most of December.

Christmas Eve crash

A report from footfall tracker Springboard on Saturday showed that the much-hoped-for last minute rush didn’t happen on Christmas Eve.

Yes, major shopping destinations were busy but overall footfall up until noon was down nearly 4% year-on-year and down 5.5% compared to Friday. It looks like most people wanted to get their shopping wrapped up by Friday and with many stores gong into clearance sales mode last week, shoppers who did venture out of Saturday were looking for discounts.

Christmas Shopping 2016 Regent StreetHaving spent Saturday in the suburbs it was pretty clear that ordinary suburban shopping areas weren’t seeing a late rush (apart from supermarkets where fresh food was the obvious target). The roads were quiet too.

Springboard said that while trips to out of town destinations rose 3% compared to Friday, that was likely to be driven by click and collect trips, and footfall fell 4.6% compared to a year ago. 

Christmas Day online shopping is estimated to have topped the £800m level, as expected, but Boxing Day is usually the big shopping day.

Christmas Shopping 2016 AccessorizeBoxing Day boost? Nah…

Springboard said it expects Boxing Day to generate “an equivalent value of in-store sales to Black Friday.” Will that happen? The New West End Company is predicting a spend of £55m today in London’s biggest shopping area, helped by international shoppers (although a black-cab driver told me London was surprisingly quiet last week).

And reckons we’ll spend £2.95bn in stores and £900m online, across the country today. Meanwhile, a new Barclaycard report said 23% of Britons will shop in the Boxing Day sales and will spend almost £4bn. But that’s down from 32% of Britons last year, and pre-Christmas discounting is to blame.

And Springboard’s figures for the day so far seem to support that. By noon, footfall was down 6% year-on-year. And shopping centres were down a scary 16.6%. Online was at least up 11.5% but that won’t be enough to make up for the lower interest in physical stores. And those discounts, if they’re ‘desperation deep’, will be hurting magins.

Christmas Shopping 2016 Selfridges

B****r Black Friday

So Black Friday really has been skewing the season. And there’s another way Black Friday has ruined things too. Returns specialist Clear Returns said up to 20% of potential clearance sale bargains (or £1bn-worth) are still stuck in warehouses and not on store rails with policies that allow Black Friday bargains to be returned up to a month later causing the problem.

The Telegraph reported that last year some stores (mainly womenswear stores) saw over 60% of Black Friday buys being taken back over the next few weeks.

As it can take several days to process returns and make them suitable for resale, large volumes of Black Friday returns won’t get back into shops in time.

And there we have a double whammy caused by Black Friday. Not only has it driven Christmas shopping to the ‘wrong’ end of the season, caused us to be resistant to full price goods and reduced spending throughout December. But now it’s also meant that stores can’t even be sure which Black Friday bargains they actually sold and which will have to be marked down even further when they come back to them.

We’ve really screwed up the Christmas shopping and clearance sales season. haven’t we?

Christmas Shopping 2016 Selfridges Santa

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