Time to get dreaming of a budget Christmas

Consumers are bent on cutting back on the cost of christmas, forcing retailers and brands to look for new ways to secure a portion of their spend.

When people open their presents around the Christmas tree this year, they are likely to find thoughtfully made and carefully wrapped gifts because it has become the season to get crafty, according to research by GMI, which runs online panels.

With 14 per cent of people planning to save money this year by making instead of buying gifts, retailers need to think creatively to ensure they stock the right products to assist these personal manufacturing initiatives.

Among the home-made gifts being planned for this Christmas, biscuits are the most popular, with 42 per cent of responses, followed by cards (34 per cent), jams and preserves (31 per cent) and Christmas cake (26 per cent).

Gift site Prezzybox.com and kitchenware brand Lakeland have both increased their supplies of ‘make to give’ products to reflect this growing trend (see Marketers’ Response, below).

GMI marketing director Ralph Risk says of the trend: “Craft gifting has a double benefit: it can help people save money and offers people more personal ways of giving gifts.”

Saving money is the motivation for 28 per cent of people questioned about their Christmas shopping plans via an online panel in October and November, according to GMI. More than half (58 per cent) plan to spend less on presents than they did last year, posing a challenge to much of the high street where retailers rely on a good Christmas trading period to keep profits healthy.

Risk says: “With people planning to spend less this year, retailers and brands need to work harder to persuade them to spend that money with them.”

Some people plan to play a waiting game, determined to buy all their gifts at the last minute when retailers have discountedtheir products (see The Christmas Standoff, below).

By comparison, 21 per cent of shoppers questioned by GMI had already purchased presents during sale periods throughout the year to spread the cost and budget for the festive season more effectively.

Meanwhile, almost half of respondents (43 per cent) plan to use discount vouchers in supermarkets to make their money go further. The drawn-out economic downturn has transformed consumers into professional deal-hunters, says Risk.

“Consumers are a lot more savvy with discounts. The downturn has meant people now understand a lot more about how to spend money wisely. They are looking at all the deals and like the idea of getting a good one.”

This habit is not likely to recede, Risk adds. “While the economy has picked up, people aren’t that confident. Many haven’t seen a positive effect, such as a change in their income or having more disposable income to hand. Instead of people spending beyond their means as they might have done after 10 years of boom [experienced in the mid-2000s], people are saying ‘Let’s just be a bit more cautious’,” he says.

Shoppers are turning increasingly to the internet for Christmas bargains, with people of all ages intending to order at least some of their presents online this year.

lakeland-product-2013-460
Lakeland has boosted its range of ‘make to give’ products to capitalise on the trend

The internet will be the most popular source of gifts, according to GMI’s research, as 48 per cent of consumers intend to shop online and only 29 per cent plan to visit high street shops for their purchases.

Younger adults intend to do more of their shopping online than their elders, with 18- to 34-year-olds saying that 56 per cent of gifts are likely to be bought online while 55- to 64-year-olds put the figure at 41 per cent.

GMI’s Risk highlights the increasing ease of online purchasing, while noting that delivery charges are becoming more competitive. Online also makes it easier to compare prices before purchasing, he argues, so retailers will have to find ways to differentiate their offerings if they want to avoid competing on price alone.

“Retailers need to look at the service they provide or match prices,” he says.

But the high street still has an important role to play, Risk believes, as it can offer a shopping ‘experience’ that cannot be replicated online, making shoppers more likely to make spontaneous purchases.

“It’s easier to browse on the high street,” he says. “Online has got a lot better but you still have to understand what you want to buy.”

Brands with a presence on the high street should try to appeal particularly to female shoppers, says Risk, as the research shows that 33 per cent of women intend to shop there for Christmas gifts compared with 26 per cent of men.

While people are generally planning to spend less than usual this Christmas, almost 20 per cent anticipate spending up to £300 on food, presents and decorations, while 35 per cent expect to
spend more.

Of the latter, 21 per cent intend to splash out on food and presents, 13 per cent on alcohol and 8 per cent on decorations.

However, many individuals seem to have difficulty cutting back on gift purchases, despite their best intentions. While 45 per cent of those questioned by GMI have contemplated not buying Christmas presents this year, only 6 per cent intend to follow this through.

And while the majority of people will purchase gifts, most plan to do so while keeping within their means.

Just 7 per cent intend to borrow money to fund their Christmas purchases, while 38 per cent admit to being worried about how much they will spend in total.

Traditional habits die hard, however. Although shoppers generally intend to reduce their spending in some areas this year, most of them nevertheless plan to send Christmas cards to friends and loved ones as usual. The data shows 67 per cent of 18- to 34-year-olds and 85 per cent of 55- to 64-year-olds have this intention.

And while Christmas for many will be celebrated on a tighter budget this year, there will still be plenty of room for the festive spirit, which retailers and brands will hope to benefit from in the countdown to 25 December.

Marketers’ response

tony-preedy-2013-150

Tony Preedy
Marketing director
Lakeland

The ‘make to give’ trend has existed for two to three years and we’ve been increasing stock of these products each year to reflect this. [The trend] coincided with the recession, with consumers realising that they could invest their time and show their love by making gifts.

People want their gifts to look professional and attractive, such as by using silicone moulds to make chocolates. In October, sales of our chocolate moulds rose 25 per cent year on year.

We are an internet-based retailer. The website is where we put most of our content, but we don’t generally get too fixated on where the sale comes from. We are – to use the buzz phrase – ‘omnichannel’. We’re a brand first and foremost and have many routes to market.

kieran-elsby-prezzybox-2013-150

Kieran Elsby
Marketing and PR manager
Prezzybox.com

People are always seeking a bargain, which fits the ‘make your own’ trend. But it’s not always about saving money; it’s also about people finding a hobby and wanting to give more personal presents.

Our candle-making kit retails at £13.95 and makes 12 candles, compared to paying around £3 a candle in a high street store. We also sell a dog-treat making kit and people are savvy because it makes 12 treats for £1 versus around £3 per treat in the shops.

I think the way people search online lends itself to buying craft products. They can watch online videos of how to make things and then click to find and buy a product. We’ve noticed a 63 per cent increase in craft sales year on year.

The Christmas standoff

There’s a battle of wills going on in the run-up to Christmas this year. Will customers cave in, rushing to buy presents for their friends and family, or will retailers crack first and offer discounts to entice people into their stores?

Some people have already decided that they are prepared to wait, with 13 per cent of respondents to GMI’s festive shopping research saying they will hold on and buy gifts at the last minute
when they have been reduced in price.

Ralph Risk, marketing director at GMI, says: “People are holding out for panic discounting.
It’s a fine balance for retailers and brands because if they discount too fast, they can cheapen their products.”

Prezzybox.com is hoping to get the balancing act right. It is not planning promotions for December but is hoping to arouse the interest of shoppers by offering a £5 online discount voucher via high street health and beauty
store Superdrug.

But predicting when people are going to start shopping is difficult, argues Tony Preedy, marketing director at Lakeland. He says: “Christmas gets later every year and customers hold on.”

He adds that shoppers do not tend to start buying presents until the weather gets colder, so marketers have to contend not just with economic uncertainty but with the climate too. The UK’s early cold snap this November might therefore have worked in retailers’ favour.

Methodology

GMI surveyed 1,000 people in the UK through its online panel in October and November 2013, asking how they plan to celebrate Christmas this year, how much they will spend and what they will do to save money. All respondents plan to celebrate Christmas this year.

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