Jane Bradley: Why talk about booming Christmas sales is premature
When I worked as a business journalist at the peak of the recession, we used to like to write that Next was the bellwether of the British high street. It was one of those meaty phrases like “trousered” or “solutions provider” which only ever appear on the financial pages. Happy days.
In the case of our ‘bellwether’, it was a fair point. In those days, whatever happened to Next would often be an indicator of how the retail sector might fare. When the recession hit in 2008, Next immediately reported a depressed consumer outlook with a slump in sales as early as November 2007, just weeks after Northern Rock sought emergency funding from the Bank of England – the first sign of the financial crisis. Many others followed suit, with plenty of retailers failing to cling on to solvency quite as well as the stalwart fashion house, which made a recovery, post-recession.
Earlier this week, our trusty bellwether Next jubilantly reported a 1.5 per cent jump in sales over the 54 days before Christmas Eve, buoyed by an off-the-planet 13.4 per cent rise online. I even resurrected the phrase in my report for The Scotsman’s news pages about the update, feeling strangely nostalgic.
However, the days when business hacks could make predictions based on Next’s performance turned out to be over this week, when the second major retailer to report festive sales figures, Debenhams, had the opposite experience. Its own UK Christmas sales were down by 2.6 per cent, despite a rise in its “digital” performance of 15.1 per cent – its one bright spot in an otherwise gloomy trading statement. Its profit forecast is still down significantly.
Therein lies the rub. The rise of internet shopping has caused a lot of the uncertainty. The art of predicting how retailers will perform was developed before internet shopping took hold and the already slightly finger-in-the-air technique is now less reliable, making it trickier for hacks and analysts alike to work out what is what.
Customers now go for ease and price. Branding is less important, how easy it is to buy something is key. And retailers have to face the fact that something a customer has bought online is not as likely to remain in their possession as an in-store purchase would. The effect of this is that retailers may rejoice in strong online Christmas sales figures, but by the end of January, half of those purchases may have been returned to them.
A panic buy of a jumper for dad may have been usurped when you spotted the perfect gift on Christmas Eve, so the jumper goes straight back once you remember to take it out from languishing at the back of the kitchen cupboard. That gift receipt you got with that hideous vase from Great Auntie Joan may be dug out in the first couple of weeks of January and the purchase sent straight back to the shop.
When it comes to clothes shopping, while the vast majority of purchases made in person are kept – the hassle of trekking back into town to return something does wonders for focusing the purchasing brain – those bought online are not. For online shopping is essentially the same as stepping into a changing room. You might take in four or five dresses and possibly, just possibly, keep one. Yet now, the changing room is in the comfort of your own home and to do so, you fork out upfront for the cost of all of the items, giving the retailer false hope that you might actually keep them all. Ease is the key. The increasingly, user-friendly mobile websites touted by retailers (this is something which Debenhams has invested heavily in in recent months) make it simple and quick to shop while doing something else – making the dinner, or watching TV.
Or like me, standing in the queue the other day to buy a new electric toothbrush at Boots, while browsing online to find the same item at half the price and snapping it up for next day delivery before I made it to the front of the queue. Indeed, ecommerce trends expert PCA Predict reported this week that 70 per cent of online shopping done on Christmas Day itself – sadly, an increasingly popular pastime once the presents have been opened and the turkey scoffed – is done on mobile devices.
And while online sales have been credited with boosting Next’s fortunes – and those of many others – there is no doubt that click-and-collect has had a similar effect. While having packages delivered straight to your front door might appear to be the pinnacle of convenience, in actual fact, the number of “Sorry you were out cards”, especially over the festive period, can cause more trouble and lengthy journeys than embarking on a real-life shopping expedition in town.
Therefore, the luxury of browsing in your own home, combined with the convenience of picking up a parcel at your local branch, or even at a network of local shops where parcels can be dropped off and collected by the customer, has created just another way that people can shop without having to actually visit a shop – or see the goods they are going to buy in real life.
Courier companies have backed up the theory that many of the so-called Christmas sales could be returned over the coming weeks, confirming that they are busier than at the same time last year with parcels on their way back to retail depots.
ParcelHero, for one, has said that the number of packages being returned in the early part of this week had rocketed compared to the same period last year, dubbing the first day back after their Hogmanay holiday “wing-back Wednesday”.
It has been a long-held belief that retailers will need to embrace the internet age if they want to survive. Yet, this is just stage one: what they actually have to embrace is the uncertainty after luring in online shoppers.