It’s beginning to look a lot like iXmas!

Tim Lawrence

Head of Strategy & Planning

Talking about Christmas in July feels a little odd to those outside of retail, its almost as far from Christmas as we can get, and the weather isn’t conducive to snow or Christmas jumpers. But we understand how critical forward planning is and how we can inform the performance of this vital Black Friday/Cyber Monday and December retail period, from today.

The Christmas, Black Friday/Cyber Monday period is usually a time for quite traditional behaviour amongst consumer; we tend to do similar things each year, prompted by retail sales or by family tradition.

2020 has been a very non-traditional year to date; in January the idea of being confined to our homes in a nationwide lockdown seemed the work of science fiction but is now normality. How will Christmas be impacted?  

Here are a few (early) thoughts...

Could it really be a season of giving?

Coronavirus has had a devastating impact on the world and people have been genuinely worried about the health and finances of both themselves and family. However, for many its been a moment to re-assess -

53% of people think that there is a greater sense of community (Source: DRG), and 83% say they feel family and friends are more important than ever (Source: Hearst COVID-19 Barometer) as a result of Coronavirus.

Christmas is often called ‘the season’ of giving, often in todays commercial world this is purely present giving, but could Christmas 2020 see a desire to be more charitable and give back or simply say ‘thank you’ to those that matter?

The Christmas of ecommerce

Its likely, one metre or not, people will avoid the high street crush for Christmas shopping, 31% say they won’t visit shops for some time/ a long time (Source: GWI) and with social distancing still likely to be in place it won’t be as easy to shop for multiple items.

The UK high street was fragile before Coronavirus, in 2019 124 retailers went into administration (Source: Deliotte), then the lockdown saw Oasis and Warehouse, Cath Kidston, Oak Furnitureland, Laura Ashley and Debenhams follow suit. This will leave a big hole on the high street this Christmas Retail experts at KPMG had previously expected high street retail space to shrink by 25% by 2025, but now see that happening by 2022.

KPMG have brought forward their estimate that ecommerce will reach 50% of sales by five years to 2025 and we’re likely to see increased spend online this Christmas. There are implications for last minute shoppers who rely on popping to the shops, which could lead to a more organised and planned Christmas to a degree. Online winners will be those that can guarantee delivery; Amazon has grown its share of the UK ecommerce category over lockdown as consumers relied on its fast and punctual delivery

Revenge buying

Revenge spending refers to an overindulgence in retail therapy by consumers who have missed shopping and dates to the 1980s, when China’s economy opened up. The phenomenon has already been seen in China in April when Hermes recorded sales worth $2.7 million in its Guangzhou flagship stores on the day it reopened - the biggest single-day shopping at any luxury outlet in China.

Here in the UK we have never experienced such a situation of pent-up demand and although the number of people unemployed increased by 1.6m since March and 9.3 million people have been furloughed, there has still been signs that people are looking for retail therapy post-lockdown. IKEA and Niketown have seen customers queuing to get inside and Rightmove reported its busiest ever day. The Bank of England’s chief economist has suggested that early data indicated a sharper recovery than many thought (a ‘V shaped recession’).

If this does prove to be the case, we can expect those who are lucky enough to have remained in work to splurge on bargains at the key Q4 retail periods. Although we may see an increase in luxury spend as per the China example, in the UK whatever happens with the economy, we can expect personal budgets to be tighter so we can anticipate a more competitive Black Friday than ever.

Small Luxuries

The so-called "Lipstick effect" describes the cosmetic industries traditional ability to be recession proof as consumers continue to treat themselves and social custom defines the need to keep up appearances. In this recession things may be different due to face masks and zoom calls, Hearst research showed those working from home reduced cosmetic spend more than those who didn’t.

However the idea that some products and categories outside of beauty may be seen as small luxuries remains particularly, due to availability or cost, experiences denied during lockdown and those potentially harder to obtain post. Experiences such as family days out or a meal at your favourite restaurant may become more suitable gifts than in previous years.

This Christmas we may see presents that people have been denied during lockdown such as events (where available), beauty treatments, meals out and physical experiences. The impact of social distancing on experiences and the associated reduced capacity may increase the cost of these much coveted experiences.

A remote Christmas

Finally, the worst-case scenario. None of us want to consider this but there is a chance that a second wave of COVID-19 may impact areas of the UK at Christmas as people mingle more inside and as the weather get colder.

Whilst this would be less of a shock than the initial lockdown it would be doubly depressing in the winter months at a time when people traditionally see loved ones. There is an obvious impact on ecommerce in this scenario, particularly grocery shopping which struggled to cope with March-April demand as well as millions of first time Turkey roasters looking for information and recipes.

In conclusion, we can anticipate that Christmas will be different this year and there is an opportunity for to brands to provide more emotional and, in some cases, physical support. We may see brands creating zoom quizzes, sponsoring or funding virtual get-togethers and even staff visiting and delivering gifts or supplies. As we have seen brands such as Nationwide demonstrate,  consumers can expect authentic and human traits from brands they come in contact with and actions, not words will be most appreciated.

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