UK Retail: Christmas 2009 Forecast - what's in store?

Introduction

Verdict Research: UK retailers are facing an unprecedented decline in the all-important Q4 sales period as a combination of unique factors come into play. The combination of recession, falling consumer confidence and capacity, and a VAT cut are all having a major impact on consumer retail expenditure. This report forecasts sales and winners per sector, with detailed analysis.

Scope

• Q4 2009 spending trends; clothing & footwear, DIY, electricals, furniture, food & grocery,health & beauty, homewares, other sectors, online sales.
• Value, volume and inflation growth and spend per head in each sector with changes year-on-year.
• Unique survey of UK consumers' attitudes to spending in Q4 2009.
• Trends by value, volume and inflation Q4 2005-2009.

Highlights

For the first time since Verdict's records began in 1989, we forecast retail expenditure will be down this Christmas. We estimate the market will shrink by 0.7% in Q4 2009 equivalent to £535.0m. But this conceals diverse trends in each sector.

As consumer expenditure includes tax, the 2.5 point cut in VAT has been a significant factor in the reduction in spending in non-food (food & grocery is largely VAT free). To maintain sales at last year's level, volume or prices would have to rise but overall both have declined and retailers compete aggressively to win share of a smaller market.

At least one in three consumers intend to cut back on their spending this Christmas, with family shoppers and those on low incomes the most nervous. At least 40.0% of consumers in the south and East Anglia, where the financial crisis has hit the hardest, are considering cutting back.

Reasons to Purchase

• Measure your company's potential share of each sector and focus on most productive outcomes.
• Devise winning strategies to gain share of consumers' spending using unique survey of spending intentions.
• Benchmark your performance against the sector to devise future growth potential.
   

Overview

Introduction

SUMMARY
    Christmas spending down as non-food doubles its drop of Q4 2008 to £1.3bn;
    VAT cut a significant factor in decline in spending;
    Exit of casualties has also reduced capacity for others to win;
    Consumers will be the winners as retailers fight for their custom;
    Women will stop this being the worst Christmas ever despite their intention to cut back;
    Online will be the star yet again - despite the postal strike scare;
    Electricals set to be biggest loser;
    Not Armageddon, but survival of the fittest.
    Executive Summary

KEY FINDINGS
    Christmas spending down as non-food doubles its drop of Q4 2008 to £1.3bn
    VAT cut a significant factor in decline in spending
    Exit of casualties has also reduced capacity for others to win
    Consumers will be the winners as retailers fight for their custom
    Women will stop this being the worst Christmas ever despite their intention to cut back
    Online will be the star yet again - despite the postal strike scare
    Electricals set to be biggest loser
    Not Armageddon, but survival of the fittest

Table of Contents

Table of figures

Table of tables

Analysis
    Spending set to fall as unique factors take effect
    Christmas 2009 headlines - expenditure falls for first time, but not retail Armageddon
    Consumers - intending to cut back on expenditure and being more selective
    Sector performance - only two show growth
    Clothing & footwear - time for a new party dress
    DIY & gardening - wrong time to move house
    Electricals - little sparkle in the market
    Food & grocery - we all have to eat, especially at Christmas
    Furniture & floorcoverings - not a priority for consumers nervous about spending
    Health & Beauty - looking and feeling good still a priority
    Homewares - pretty up the house for visitors
    Other sectors
    - Toys
    - Books, music & video
    - Jewellery
    - Others
    Online - the saviour

APPENDIX
    Methodology
    Further reading
    Ask the analyst
    Verdict consulting
    Disclaimer

List of Tables
    Table 1: Spending intentions by age group for Christmas 2009
    Table 2: Estimated expenditure, growth rates and year-on-year change in value by sector Q4 2009
    Table 3: Estimated Y-o-Y change % in sector expenditure by value, volume and inflation Q4 2009e
    Table 4: Clothing & footwear expenditure summary Q4 2009e
    Table 5: DIY & gardening expenditure summary Q4 2009e
    Table 6: Electricals summary expenditure Q4 2009e
    Table 7: Food & grocery expenditure summary Q4 2009e
    Table 8: Furniture & floorcoverings expenditure summary Q4 2009e
    Table 9: Health & beauty expenditure sector summary Q4 2009e
    Table 10: Homewares expenditure summary Q4 2009e
    Table 11: Online summary Q4 2009e

List of Figures
    Figure 1: Summary of spending trends Christmas 2009
    Figure 2: UK retail growth by quarter 2009e
    Figure 3: Value change in retail expenditure Q4 2009e
    Figure 4: Total spend and growth year-on-year in UK retail Q4 2009e
    Figure 5: Y-o-Y change % in volume, inflation and value sales Q4 2005-2009e
    Figure 6: Sector share of expenditure Q4 2009e
    Figure 7: Spending intentions by gender for Christmas 2009
    Figure 8: Spending intentions of UK population at Christmas 2009
    Figure 9: Spending intentions by social class for Christmas 2009
    Figure 10: Percentage of population by UK region intending to spend less at Christmas 2009
    Figure 11: Major sector performance - value growth Q4 2009e
    Figure 12: Major sector performance - volume growth Q4 2009e
    Figure 13: Major sector performance - inflation/deflation Q4 2009e
    Figure 14: Clothing & footwear expenditure growth trends vs non-food Q4 2009e
    Figure 15: DIY & gardening expenditure growth trends vs non-food Q4 2009e
    Figure 16: Electricals expenditure growth trends vs non-food Q4 2009e
    Figure 17: Food & grocery expenditure growth trends vs non-food Q4 2009e
    Figure 18: Furniture & floorcoverings expenditure growth trends vs non-food Q4 2009e
    Figure 19: Health & beauty expenditure growth trends vs non-food Q4 2009e
    Figure 20: Homewares growth expenditure trends vs non-food Q4 2009e
    Figure 21: Forecasting methodology