As the Christmas shopping season nears, retailers will rely on the weather for a significant portion of their festive trading.
It seems retailing is in another turbulent trading period. Tesco, the barometer of retail success, has caught a cold and Next expressed caution on the impact of mild weather. Even in the value sector Wilko is finding the new insurgents such a challenge that it is reducing head office overheads by making redundancies. And if increased competition wasn’t enough, the recent warm weather has put a serious dent in the success of autumn trading for fashion and mixed retailers.
So what does this suggest for the success of Christmas trading? Well, firstly, unless we have a severe cold snap and shoppers need a wardrobe overhaul, retailers will be forced to offer significant price reductions either immediately or pre-Christmas.
On the plus side, this could encourage shoppers back in search of bargains although, once again, margins are likely to be impacted, challenging retailers in the search to maintain the value of the bottom line.
At the same time, however, there are continuing constraints on household income. While inflation is low, wages are still lagging behind, which means shoppers are continuing to lose out in real terms and they have got used to being mindful of their spending levels.
Having said that, according to Deloitte, consumer confidence in the third quarter of 2014 has improved and the headline rate is now at an all-time high, which suggests shoppers are more likely to spend this Christmas.
So what does this mean for bricks-and-mortar stores? By tracking footfall continuously across the UK we know it does not begin to increase in earnest until the second week in November.
So stores have only seven weeks to maximise their trading potential. Over this seven-week period, footfall has dropped by an average of 1.8% during the past two years, with sales up by just 0.4% during December.
However, over the past two years the weather in December has been the wettest and most windy since the late 1970s, so inevitably footfall was lower, with sales also being hit as the adverse weather kicked in late in the month when the deadline for internet deliveries had passed.
By contrast, in December 2011 when the weather was the mildest since 2006, footfall increased 5.1% and sales 2.2%.
The other fact that is never far from any pundit’s lips is the impact of the internet. Online sales increased by an average of 19% in December over the past three years, and Conlumino is forecasting that the volume of click-and-collect orders will rise by 40% this year. It is clear that the complementary nature of stores and the internet – and the quality of an omnichannel proposition – is key for the success of bricks-and-mortar stores.
My forecast for footfall this Christmas? If the weather stays fair and in the absence of economic calamities, we should see a modest but noticeable uplift in customer activity in retail destinations. Inevitably, however, the next question will be whether it is town centres or out-of-town locations that will benefit.
- Diane Wehrle, marketing and insights director, Springboard