Retailers ‘cautiously optimistic’ about Christmas shopping despite cost of living pressures

Deloitte Retailers’ Holiday Survey 2022 assesses sentiment in the run-up to Christmas and sets expectations for the year ahead.

The results showed sales are expected to increase by 67 per cent over the Christmas period, compared to 80 per cent last year.

Another 58 percent expect consumer confidence to deteriorate next year.

Other key survey findings include:

• 24 percent say December is their critical shopping period, up from 37 percent in 2013;
• 58 percent are confident their logistics teams will meet demand, up from 29 percent last year;
• 43 percent predict that profitability growth will be flat this year;
• 45 percent expect online sales to exceed 10 percent, up from 55 percent last year; and
• 48 percent say data privacy is a high risk to their business as a result of increased customer data collection.

Deloitte’s national leader for retail, wholesale and distribution, Melissa Dean, said the past 10 years have seen more fundamental change in retail than ever before, with the promise of e-commerce.

“This has fueled the explosion of goliaths in online retail and created a booming fulfillment industry. It saw the world reconsider what retail stores are for in the real world,” she said.

“As retailers begin to look past Covid-19, there is a sense that technology, innovation and new business models will allow the industry to capitalize on new consumer behavior and take a big step forward in defining what the future shopping experience will look like.

“Despite the current economic uncertainty, the Australian consumer still loves to spend and by accompanying customers on their journey and adapting to their changing needs, retailers will be well positioned for a strong festive period and beyond.”

Australian Retailers Association chief executive Paul Zahra said the Christmas quarter was the most critical, with many stores taking up to two-thirds of their profits.

“As retailers ramp up preparations for the busiest time of the year, the mood is upbeat, but questions remain about the severity of cost-of-living issues and how this will affect consumer spending during the holiday shopping season,” he said.

“Despite the uncertainty, retail turnover in the first half of this year was a record.

“Consumers continue to spend amid rising interest rates and inflationary pressures that have not directly impacted spending.

“The concern is that it will take some time for these factors to affect the economy, so we may see some tightening of belts and softening of sales in 2023.”

Mr. Zahra noted that when households experienced financial stress, impulse purchases were the first to decrease.

In the run-up to Christmas, he said the biggest problem remained the labor shortage, with more than 40,000 vacancies in retail.

“A lot of businesses struggle to trade at full capacity because they can’t get enough people to fill the shifts,” he said.

“This means Christmas casual recruitment will be difficult as businesses are already struggling without high demand over the festive season.”

The research comes after it emerged last week that Australians are cutting back on luxury purchases and looking for bargains as they battle rising inflation, according to the National Retail Association’s consumer sentiment report.

Almost half of shoppers surveyed said they felt confident about the pre-Christmas sales, with one in five planning to spend more money last year.

The data also showed that 71% of consumers have changed their spending behavior due to inflation.

“Consumers are feeling the effects of continued interest rate hikes and are acutely aware of the impact these inflationary pressures are having on their hip,” the report said.

“This is driving significant changes in consumer spending habits, with consumers reporting that they switched brands more frequently in 2022 than at any time since the pandemic began.”

Originally published as Retailers ‘cautiously optimistic’ about Christmas shopping despite cost of living pressures