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Christmas 2020 – an experiment for retail?

Christmas online shopping 2

Christmas 2020 will be like no other in living memory for most retailers. But how much of this is caused by COVID-19, or has COVID-19 simply accelerated long-term Christmas shopping trends?

Christmas is essential for many retailers’ profits - the British Retail Consortium has estimated that November and December account for over a fifth of all retail sales. There have been predictions of a bleak Christmas for some UK retailers, but for others, Christmas 2020 may be a great opportunity.

Christmas comes earlier

Panic buying of Christmas gifts during October has been reported, and the British Retail Consortium estimated October 2020 retail sales had grown 4.9 per cent year-on-year, consistent with a long-term trend for the Christmas selling season to get longer. One reason for this is to achieve greater utilisation of retailers’ assets over a period of months, rather than straining their resources during a few weeks around Christmas. Starting the season earlier generates cash flow earlier to pay for stocks. Black Friday is part of this this trend – retailers also want to make sure they get buyers’ Christmas spending before competitors have it. Likewise, New Year sales have become less about clearing surplus stock, and more about using specially bought-in stock and pre-planned promotions to extend buyers’ spending. This trend was in place well before COVID-19.

Christmas shopping can evoke anticipation of Christmas, and anticipation itself can provide pleasure to consumers, even if Christmas Day itself may be a disappointment. So bringing forward the Christmas selling season may suit the needs of both shoppers – because they get the benefits of enjoyable anticipation – and retailers, who get their money sooner.

An online Christmas?

There are many indicators that 2020 will be a bonanza Christmas for online retailers. The share of retailing done online has been steadily increasing, with Office for National Statistics figures showing it reached a peak of 32.8 per cent in May 2020 during the first lockdown, subsequently falling back to 26.1 percent in September 2020 as enforced online buying dropped out of the figures. Christmas 2020 will most likely result in delays as delivery services are stretched beyond design capacity. Distribution centres are scalable and already becoming more efficient through automation. However, the final leg of delivery journeys remains labour intensive, and despite initiatives such as pick-up lockers and collection points, delivery costs in real terms are rising and capacity cannot be easily expanded in the short term. Amazon has reported that its shipping costs worldwide are rising faster than its sales growth.

Love Christmas shopping?

Although Christmas shopping may be a nightmare to some, it is likely to be one aspect of shopping that remains experiential rather than a utilitarian necessity. Long-term, shopping centres which provide high levels of entertainment and amenity value are likely to win out in the battle for Christmas spending. This year, the entertainment value of Christmas shopping has been limited by the closure of catering facilities, social distancing and restrictions on mixing of households. When restrictions are lifted, shopping centres that have positioned themselves as leisure destinations will win out.

The make-up of shopping centres that customers will encounter has been changing. A long-term trend has been the gradual demise of department stores, which have lost out to niche retailers who focus on selling a limited product portfolio, doing so more efficiently and with greater depth of selection than general-purpose department stores. Also, the curation role of a department store has been declining, as buyers gain confidence in exploring new specialist retail brands, and they find online means of identifying collections of products which seek their needs. This trend has resulted in British shopping centres losing some of their anchor shops – Debenhams, House of Fraser, and BHS have all either disappeared completely, or are now missing from many shopping centres.

New opportunities

Physical retail space is not all doom and gloom, because there have been developments with alternative formats which may be better suited to Christmas shopping. “Pop-up” retailing has gained a new status, as landlords and retail entrepreneurs recognise the value of flexible leases to allow a shop to open for just as long as the customers are there, and no longer. Christmas markets are another manifestation of pop-up retailing which can add to consumers’ sense of variety, without retailers having to pay all year round overheads. A retail outlet can be just for Christmas, and not for life.

COVID-19 has accelerated some trends in Christmas shoppers’ attitudes and behaviours. Lockdown one accelerated the number of consumers seeking creativity in producing goods themselves rather than buying ready-made goods. From knitting to DIY, Christmas shopping lists are likely to include more of the means to make things, rather than the things themselves. So knitting equipment rather than pullovers, glitter and paint rather than finished Christmas decorations.

Sustainable shopping

A beneficiary of COVID-19 has been the environment, with less travel being undertaken, and renewed focus on preventing climate change. There has been a trend towards more ecologically aware consumption, and shopping lists for Christmas 2020 are likely to include more gifts which make a statement about the gift giver’s environmental values.

Long-term, a big challenge for retailers at Christmas would be a shift in values away from consumption as an end in itself, linked to issues of sustainability. “Ostentatious utilitarianism” arises from time to time, when some groups in society find personal and social value by emphasising their frugality by adopting a simpler lifestyle and consumption pattern. Predictions of a return to the “good life” of simplicity have been made before, but despite initiatives such as “Buy Nothing Day” as an antidote to Black Friday , there is little evidence that these values are about to become mainstream. There are still too many vested interests in keeping the process of encouraging consumers to spend more going, so that companies produce more, giving employees more income, and the government more tax revenue. But retailers may look to sell tokens of what might be deep-seated needs for simplification in a consumption-led culture.

Christmas ads say it all

And so we arrive at this year’s crop of retailers’ Christmas ads. There was speculation that it would be in bad taste for retailers to spend a lot of money on adverts when large groups of consumers have been suffering. But retailers have been quick to adapt, recognising that buyers still want to be entertained and to identify with the retailer’s values. So the values that retailers are stressing this year emphasise togetherness and social wellbeing. Furthermore, a large segment of buyers have a lot of spending power available, due to enforced savings from cancelled holidays and leisure activities. Retailers need to make this group feel happy about spending more at their favourite retailer on gifts for others.

Christmas 2020 will certainly be different to any before it. Retailers will surely try to adapt, and may be looking at this year’s trading season as an experimental laboratory in which existing trends were pushed to an extreme. Christmas 2021 will benefit from what retailers have learnt in these conditions. And with many more retail failures expected, a rebound in consumer spending will be a boost to be shared between a smaller number of surviving retailers.

Professor Adrian Palmer

Head of Marketing & Reputation
Published 9th December 2020
Topics:
Leading insights