As Christmas nears, there is little seasonal cheer as retailers anticipate a Golden Quarter characterised by levels of volatility and uncertainty they have rarely, if ever, experienced before.

The pandemic continues to disrupt everyday life and business – and the industry will need to be on its mettle to navigate a near-unrecognisable landscape.

1. Bad mood Britain

Britain has been ill-served by its political leaders. Not only have they presided over mixed and sometimes contradictory messages about how people should behave, they have fostered division and discontent through their handling of the crisis.

The result is alienation and demoralisation among much of the public, potentially undermining confidence during the peak trading period.

On top of the Covid crisis, Brexit remains unresolved. That brings the fear of price rises for consumers and operating cost pressures for businesses. Asos, for instance, revealed this week a potential £25m impact from WTO tariffs.

2. Life on hold

Vast swathes of the nation are living under tighter coronavirus restrictions that are likely to affect consumer behaviour, such as bans on indoor social mixing and pub and restaurant closures.

From Liverpool, where the strictest Tier 3 rules are in place, to London, where more severe curtailment of life looms as the capital moves into a harsher Tier 2 regime, normality is absent.

The lockdowns make city centre trading locations such as London’s West End less appealing to visitors. Retail will almost certainly suffer as a result of footfall declines.

3. Value focus

The emergency has raised fears not just about human health, but the health of the economy and, for many, household finances.

While a lid has been kept on unemployment by the various financial support schemes introduced by chancellor Rishi Sunak, it is still rising – this week the rate of joblessness reached its highest level in three years. 

As big employer industries such as hospitality face a crushing crackdown on trading, worries about possible redundancies as well as confirmed job losses – like those announced by Marston’s this week – will come into play. Many people on support schemes will have less money in their pockets than previously as the amount they will be paid is capped.

Cash-strapped consumers are likely to carry on spending with some of the low-price players such as B&M, which have performed strongly throughout the pandemic.

4. Opportunity at home

The reverse side of the coin is that many consumers continue to spend more time at home. There has already been a boom in home categories, but increased demand remains and retailers continue to seize opportunity.

Next’s customer emails promoting working-from-home essentials’ ranging from Nespresso machines to vacuuming robots ‘you never knew you needed’ illustrate the breadth of product that can be relevant.

Dunelm, which this week reported quarterly trading ahead of expectations, noted that “the homewares market continues to be resilient”.

5. Fashion victim

Fashion, however, may prove much less resilient. Established buying preferences have been overturned, with consumers switching into loungewear and activewear.

So far as parties are concerned, whether office or home, Christmas has been cancelled – and so too, therefore, have been purchases of new gear that usually typify the festive period.

Fashion was already under pressure, evidenced again in the latest BRC retail sales data. On top of that there is the prospect across the sector of shortages of certain types of popular products such as hoodies and sportswear – the hangover from lockdown factory closures and flagged by Asos chief executive Nick Beighton this week.

6. Small is beautiful

As consumers spend time at home, the opportunity for socialising is limited by bans on mixing with other households indoors at one end of the scale, and the comparatively relaxed rule of six at the other.

Either way, big gatherings are unlikely to be an option this Christmas – something that will prompt changes to the traditional Christmas pattern. Some turkey producers, for instance, are growing their birds to a smaller size than usual in expectation that shoppers will seek to avoid waste at restricted family get-togethers.  

7. Thirst for experience

Such limited opportunities to socialise create opportunity, however, as people put greater value on the quality of those experiences. Jaded by the virtual life of endless Zoom calls and Teams meetings, consumers will seek out products and services that enhance the quality of real life for themselves and those close to them.

That is surely an open door for retailers to push, particularly through their marketing storytelling, which can contextualise what they sell in a feel-good way.

8. Early spending

The signs so far are that Christmas spending is getting under way early. The trend was highlighted in this week’s BRC monthly sales data, which revealed a 5.6% increase in total sales during September.

It is in retailers’ interests to do all they can to encourage that early spending. Who knows what further unwelcome twists and turns there may be in the coronavirus saga in the short window between now and Christmas?

The more money retailers can put in the bank now, the better they will be set to ride out a potentially fallow new year. They certainly should not be banking on the last-minute rush we have seen in the past few years. 

9. Online will continue to grow

The early-buying trend will reinforce another – the shift to online shopping. Ecommerce has grown exponentially during the crisis and is likely to become the first option for many this Christmas as a result of increasingly established consumer habits, convenience and a reluctance to visit busy shopping destinations.

This week, as he reported a 57% sales rise, founder John Roberts spoke of a “global, structural shift in customer behaviour to online, accelerated by Covid”. 

The issue for some retailers may be a limited capacity to serve, rather than subdued demand – another reason to encourage early spend and avoid the logistical pressures a late surge could bring. 

10. One-stop appeal

Ironically, given the rise of online, the big store has found new appeal during the pandemic – testament to the safety precautions taken by retailers and the convenience of stocking everything under one roof.

Former Tesco chief executive Dave Lewis, who handed over the reins at the start of October, has spoken of the “return of the big weekly shop”. And Asda, as it unveiled an in-store tie-up with toy specialist The Entertainer this week, highlighted “a shift in customer behaviour brought on by the pandemic, with an increasing number of shoppers looking to complete multiple shopping missions on a single trip”.

Britain’s big four grocers could be the big winners this Christmas as a result. 

11. Must-have product

Some retailers will benefit from high-profile product launches in time for Christmas – notably the new iPhone 12 which is available for pre-order this week. 

While some aspects of virtual life have lost their lustre, if there is one item that ticks the boxes of need-to-have and nice-to-have, it must be the smartphone.

Apple’s new phone, its first with fast 5G internet connectivity and including an enhanced camera, should make it even better for activities such as gaming, streaming – and recording the big moments of life in lockdown.

12. There’s money to be spent

While the pandemic has hit the income and job security of many, other consumers have benefited financially. Those working from home have been able to save on everything from the weekly cost of their commute to the daily price of a wake-up cappuccino. 

The household savings ratio – the proportion of income saved rather than spent – has risen to 29%. That is a record level. It reflects reduced consumption, such as cancelled holidays and lower discretionary spend on retail and hospitality, but now is the time of year when shoppers traditionally open their purses. The opportunity is there for retailers to benefit.

This Christmas may not quite be the season to be jolly, but neither is it a time when retailers should lose hope – tough as conditions may be.

There’s only one thing for retailers to do – go for it. Be relevant to the constrained lives of customers. Be more relevant than ever before.


Deep dive: A Covid Christmas – how consumers will spend, shop and celebrate

This Christmas will be like no other in recent memory. The ongoing coronavirus pandemic has ushered in a unique and highly challenging set of circumstances for retailers and shoppers alike.

But with so much uncertainty surrounding the crucial Golden Quarter, how will this Christmas play out?

Hear from the likes of John Lewis, Next and Dixons Carphone, delve into exclusive consumer research of festive shopping behaviours, and discover which categories will emerge as the winners this Christmas in our deep dive report: A Covid Christmas – how consumers will spend, shop and celebrate.