Golden quarter: How retailers are preparing for another cash-strapped Christmas

As we approach the end of a year that has seen household bills soar and inflation rise to unsettling levels, the retail industry is preparing for a golden quarter forecast to be just as bleak as the past 12 months.

Consumer sentiment stands at -13 ahead of Christmas, according to PwC’s most recent survey, with 30% saying they will spend less on Christmas shopping this year due to the cost of living crisis. 

Last Christmas was a similar story, as it was predicted that retailers would struggle to gain customer spend, but many retailers performed well and the BRC reported that total sales grew 6.9% in December 2022 compared with a 2.1% rise in December 2021.

With the macroeconomic environment looking gloomier than ever, we spoke to some of the UK’s biggest retailers to get their take on whether this year’s festive season will be feast or famine. 

Thinking ahead 

With shoppers feeling the pinch this winter, many have started to plan ahead to spread the cost of Christmas. 

A survey by YouGov and Retail Week in partnership with global parcel delivery management and shipping software leader nShift revealed that as of October 23, 45% of UK shoppers have started to plan and budget for Christmas.

Retail Economics chief executive Richard Lim says there is a lot of “anxiety” among consumers, so they are being more careful with their spending. 

“Many are bringing forward their purchases into October and November, using Black Friday as a way to get discounts on Christmas presents and to spread out the cost of Christmas a bit more,” he says.

Many retailers have already reported signs of early Christmas shoppers.

“It makes no sense to have one phenomenal weekend where we can’t cope and I don’t see why we’re saving our promotions until then”

Gary Grant, The Entertainer

“When household budgets are stretched, we see people planning further ahead for good times like Christmas,” a Waitrose spokesperson says.

“We know that our customers are already prepping for the Christmas season with sales of mince pies up 36% compared to last year.

“Customers are looking to create an extra special Christmas, without breaking the bank, so we’re doing everything we can to keep our costs down and remain competitive.”

Primark has also seen an early start to festive shopping as the retailer revealed Christmas sales were already up 33% year on year in October.

Sean Sherwin-Smith, post-product purchase director at nShift, says people are shopping earlier to “bring in the bargains” and this can benefit retailers.

“With the cost of living continuing to bite, Christmas shopping will be stressful for most people and it’s important that retailers make the customer experience as convenient and memorable as possible,” he says.

“That’s partly about cost, partly about convenience and partly about choice, while many will seek to economise. By clearly badging a range of free, cheaper or greener shipping options, as well as click and collect, retailers can increase conversions.”

Bargain-hunting Brits 

While cautious consumers are spreading the cost of Christmas, others are stalling purchases as figures from the BRC-KPMG retail sales monitor show that sales growth slowed in October as shoppers look to grab a bargain over Black Friday.

Retailers are aware of the cost-of-living squeeze affecting consumers, so many have already introduced Black Friday deals and plan to spread them across the month.

John Lewis started its Black Friday promotion on November 2, slashing prices on Apple products, air fryers and fragrances, while eBay is preparing deals on its pre-loved fashion, tech and luxury items.

The Entertainer founder and executive chair Gary Grant says it will be bringing its Black Friday Sale forward.

He says: “We’re focusing on value. It makes no sense to have one phenomenal weekend where we can’t cope and I don’t see why we’re saving our promotions until then.”

Lim agrees and says “successful” retailers have been communicating and using discounts and promotions to “reach out to customers in the context of the cost-of-living crisis”. 

Tighter budgets also mean the refurbished sector is likely to do well, Music Magpie founder and chief executive Steve Oliver says consumers have been more open to buying secondhand items. 

“On Black Friday and during the Christmas period, we expect all tech items to be popular,” he says.

“Consumers will often save their big-ticket tech purchases for this period, whether that’s consoles, phones, iPads or laptops.”

This is also the view of eBay UK general manager Eve Williams who says many consumers are opting for refurbished and pre-loved items as a way to save money.

“When looking at the most sought-after gifts, we found clothing is at the top of the wishlist for many, and with eBay’s pre-loved offering, people can get their hands on one-of-a-kind or designer pieces for a fraction of the original price.

“In terms of gifts, I think there will be more of a focus on quality, rather than quantity, with people looking for those more unique and memorable gifts.”

Stocking up

In order to have a successful golden quarter and ensure there is enough stock for Christmas shoppers, nShift’s Sherwin-Smith says retailers need to “continually focus on efficiency”.

“That could mean ensuring warehouse and fulfilment teams are able to dispatch more parcels more quickly, without making mistakes. It could also involve making sure returned items go back on sale quickly, so they have a second chance to earn revenue.”

While some retailers struggled to secure enough supply and stock throughout the pandemic, this year tells a different story. 

Andrew Gossage, managing director of Ultimate Products, which owns a number of homeware brands including Salter and Beldray, says the company has “more stock available than ever” due to rising demand.

“We’re keeping very close to our retail customers and are talking to them a lot,” he adds.

“When they have gaps, we’re very quick in offering a solution and to be able to do that, we have to have a healthy amount of stock.”

The Perfume Shop has been anticipating an increase in customer demand and has taken steps to get ahead of the Christmas rush.

“We have installed an automated packing machine to increase our online fulfilment capacity,” a spokesperson says.

“Our website updates have made it easier for the customer to shop and we have personalisation options that make that special gift truly wonderful.”

Online sales are expected to rise this golden quarter and The Very Group retail managing director Robbie Feather is “confident” the retailer will benefit from this.

“Like most retailers, we started preparing for Christmas months ago,” he says.

“Everything from load testing our platform to handle increased web traffic, to creating our flamingo-filled Christmas ad, to working with our suppliers to bring in the best product. 

“In the simplest terms, the most important thing is having enough of the products families want to buy. We believe we’re well placed and have one of the best offerings in the market.”

Christmas wishes

Regardless of the negativity surrounding predictions for this year’s golden quarter, retailers remain optimistic.

Asos may have posted lacklustre results last week, but chief executive José Antonio Ramos Calamonte was upbeat about Black Friday and Christmas shopping.

“We are very excited to get into this season with better products and better prices,” he says.

“We have our teams working at full speed to make sure we have the best value proposition for our consumers.”

Similarly, after Sainsbury’s strong results, chief executive Simon Roberts says the group is winning more customers “across food and general merchandise” and that Argos is in a “much stronger place” ahead of Christmas.

“With the cost of living continuing to bite, Christmas shopping will be stressful for most people and it’s important that retailers make the customer experience as convenient and memorable as possible”

Sean Sherwin-Smith, nShift 

The Perfume Shop is also confident that it will gain customers over the festive period.

“The golden quarter is the biggest trading period for our business, delivering approximately 50% of our total sales, so our teams are working towards this period throughout the year as fragrance is an important gift,” the spokesperson says.

The team at Very expects the hype around some of this year’s biggest movies will give the toys category a helping hand. 

“Lego and Barbie will be big movers this golden quarter,” says Feather. 

“We expect toys, gifts and beauty – which grew 13% on Very in FY23 – to continue to be a key category for us.”

It seems despite a gloomy outlook as the cost-of-living crisis persists, retailers are full of Christmas cheer.