Christmas comes late for supermarkets

The official Christmas trading period started on 17 November but so far supermarkets are yet to get a festive sales boost, according to new figures.

The analysis by IRI found that value sales for most of the categories associated with Christmas, such as mince pies, brussel sprouts and champagne, are down compared to a year ago. The only category showing sales growth in the first two weeks of Christmas trading – from 16 to 29 November – are decorations, cards, crackers and Christmas treed which saw sales rise 3.3% to just under £32m.

Sales of wine and champagne are down 4.1%, while brussel sprout sales fell 23% year on year and frozen desserts were down 7.9%.

Tim Eales, strategic insight director at retail analysts IRI, says the declines are in part due to the rise of the discounters Aldi and Lidl, with supermarkets that would usually ease off on promotions forced to keep cutting prices to keep up.

He says: “Prices usually start to rise just before Christmas as deep promotions that retailers use throughout the year ease off a little so that they can maximise the boost that Christmas usually brings. This year, sales growth is making a very slow start. One way to make Christmas easier to pay for is to spread the cost of Christmas over a longer period but we don’t see that so far.”

The warm weather in November also hasn’t helped. Asda’s chief customer officer Steve Smith admitted that customers’ purchase intent in November was three weeks behind where it was last year, mainly due to the weather.

To try to boost sales, all the major supermarkets launched Black Friday promotions, with Sainsbury’s, Tesco and Asda offering big discounts on products such as TVs and tablets and Morrisons offering £5 off fruit and vegetables. High street retailers including John Lewis, M&S and Currys also offered discounts.

That has led to a rise in both the number and depth of discounts across the high street, according to professional services firm Deloitte, the fourth year of increased markdowns. Discounts ranged from 8% to 78%, with Deloitte predicting this would only increase in the run-up to Christmas.

Jason Gordon, consumer business partner at Deloitte, says he expects discounting to spike in the last few days before Christmas and again from Boxing Day, when customers could see discounts of up to 90%. He warns that retailers are playing a risky game and that the increased discounting puts margins under threat.

“At the moment we are seeing marginally deeper pre-Christmas reductions than last year, and the success of Black Friday has demonstrated the UK consumers’ appetite for a bargain. However, retailers need to be careful not to create a consumer that is only willing to buy heavily discounted items, especially as a lot of the products reduced on Black Friday were ‘bought for sale’,” he adds.

Despite the higher promotional activity and later start to Christmas shopping, spend is expected to be up this year. Deloitte estimates that spend over the festive season will hit £42.2bn this year, a 4% increase compared to last year.

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