Brits' Christmas spend on gifts will fall by 400m


Predictions of high street carnage this year could be closer to the truth than first expected.

Consumer spend on gifts is expected to shrink for the first time in a decade. The Annual Christmas Retail Survey from the business advisory firm Deloitte, predicts spend on gifts will fall by 2.8%.

In 2004, predicted spend on gifts at Christmas was 15.1 billion, but this year consumers will tighten their purse strings and spend will fall by 400m to 14.7bn.

The survey says:

  • Average amount spent on gifts per person will be 310, down 2.8% on 2004

  • The Welsh will be the most generous this year, spending on average 359 on gifts

  • People in Yorkshire will tighten their belts the most this Christmas compared with last year

  • 50% increase in the use of the internet for the bulk of Christmas gift shopping

  • The battle for the biggest selling toy is likely to be a tie between three

  • 80% of us will pay for the majority of Christmas shopping using cash or debit cards.

    Compared to last year, there will be marginal growth in spend on food and drink (7.6bn, up 1.3% on 2004) and a rise in spend on socialising (6.8bn, up 5.9% on 2004). This is the first year since 1995 that a significant increase in overall spending at Christmas has not been predicted. The survey in its 11th year, looks at the spending habits and moods of consumers and retailers ahead of the Christmas period.

    Consumer spend forecast

    The average consumer will spend 310 on gifts this year. Regional breakdown of the figures reveals the Welsh are the most generous and will spend on average 359 on gifts, compared to the East Anglians who intend to part with just 266. People in Yorkshire will tighten their belts the most this Christmas and expect to spend the least on gifts (276) compared to last year (372).

    Breakdown of spend by age shows 35-44 year olds will spend the most, on average 419 each, and 23% of this group plan to spend between 500-1,000. This contrasts with the findings from 1995 when the 25-34 age group were shown to be the highest spenders, perhaps reflecting the demographic shift towards having children later.

    Sharon Fraser, partner in the consumer business practice at Deloitte, said: 'Our research shows definite shifts in consumer spending patterns and this has far reaching implications for retailers. Spending overall at Christmas is inline with last year, so the challenge for retailers is how to draw the shoppers off the street and into the shops for a slice of consumers' discretionary spend.'

    Fraser added: 'Spend on gifts is down and this could spell trouble for retailers. The first step is to make sure they get their customer and value proposition right. But a decrease in discretionary spend can in fact be a good thing for retailers who have got these propositions working. These businesses will continue to prosper at the expense of less focused retailers.'

    Most wanted gifts for kids

    The most wanted gifts by kids under 12 is computer games, followed by consoles. The good news for parents is there is not likely to be one overall winner in the Christmas toy race this year, instead several items will compete for the top spot.

    Mobile phone ring tones, Roboraptor and the Darth Vader Voice Changer Helmet are all likely to be amongst the biggest sellers of the festive season. In addition, for older children (and indeed some adults who haven't grown up yet), there will be a significant demand for the new must have toys which include Microsoft's new Xbox 360 and Sony's PlayStation Portable.

    Paying for Christmas

    This year's findings suggest consumers are exercising more caution when it comes to paying for Christmas. 80% of us will pay for the majority of Christmas shopping using either cash or debit cards, suggesting credit card usage for Christmas is in decline.

    The Scots will use cash as a payment method (88% compared to 79% in 2004) and 84% of those that do have credit cards don't plan to take on more credit this Christmas. Despite household debt rising above one trillion, the figures suggest we are less happy to use credit than last year. This in line with data on borrowing from The Bank of England.

    Our preferred outlets for Christmas shopping

    Convenience is the number one reason why consumers (50%) choose a particular outlet for Christmas gift shopping, followed by value for money (42%) and price (37%). When it comes to food shopping, convenience is given an even higher rating with 57% of respondents putting it at the top of their list.

    Ease of car parking moved up the ranking from 25% last year to 30% this year. These factors may explain why the supermarket and the internet are increasingly popular shopping channels and this finding is likely to give the high street cause for concern as these trends take hold. With price at third place it puts into perspective the complaints of the convenience store sector about the major multiples and their pricing policies.

    Fraser added: 'This tells us convenience ultimately defines where we shop and where we spend money. A combination of store location and a tailored range of merchandise will be ever more crucial to retailers in the battle to keep customers coming through the door. Location and accessibility are now vitally important factors.'

    Supermarkets gain ground on non-food at Christmas

    Supermarkets are likely to have a very merry Christmas this year. Spend on food and drink is up slightly and the percentage of consumers who expect to do most of their Christmas gift shopping at the supermarket has increased from 6% last year to 8% this year.

    The growth rate reflects not only the consumer desire for convenience but also the supermarket's push into non-food retailing. Supermarkets are the most popular outlet for Christmas gift shopping amongst consumers aged 65 plus.

    Consumers continue to leave their Christmas shopping later than ever. The majority of Christmas shopping will be completed by mid-December (69%) and a quarter of us don't plan to be finished until Christmas Eve. Whilst this is partially caused by when Christmas Day falls this year, this is also indicative of a potential game of brinksmanship between consumers and retailers, as canny shoppers hold out until the last minute for Christmas bargains.

    Fraser said: 'Consumers are better informed and choosier than ever before. In a Christmas market where pundits have predicted 'Retail Armageddon,' the savvy shopper may well delay shopping in the hope that retailers will cut prices to stimulate demand. For this reason gift vouchers are likely to be a popular gift this year for those who want to make the most of the after Christmas sales.

    Fraser added: 'Our message to well prepared retailers is don't panic, if the customer proposition is strong, both parties will prosper this year without the need for drastic action on pricing. However, for less coherent offerings, we may well see consumers enjoying significant discounts.'

    About this survey

    The survey findings were based on consumer data obtained by market research undertaken by NOP World on behalf of Deloitte. 1000 adults aged 15+ were interviewed the respondents were selected according to a quota sample designed to be representative of all adults in Great Britain. Replies were also received from questionnaires sent out to over 280 of the United Kingdom's retailers. The retailers were from a cross-section of the industry.

    About Deloitte

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