Sleighing the competition

At this time of the year we again look ahead, trying to work out who or what will be the winners this Christmas, and what products or retailers won't resonate with consumers.

Consumer and business sentiment remains high, Consumer and business sentiment remains high, leading to the expectation that Christmas 2021 will undoubtedly be better than last year. However, retailers face strong headwinds over the period, from sourcing and the rising cost of stock, labour shortages, and increasing Covid-19 cases disrupting operations and consumer behaviour.

One of the key influencers of Christmas performance is Black Friday, which provides the potential to bring forward Christmas spend for consumers that have planned ahead and creates significant pressure on retailers to either chase sales or protect gross margins. The rejection in the UK of Black Friday by some retailers continues to grow – Dacia will not just reject the concept of Black Friday this year but actually close their Westfield Stratford store as a message to consumers about their year-round value.

The British Independent Retailers Association claims around 85% of independent retailers will not take part in Black Friday this year, with some closing websites, restricting access to registered members and/or donating proceeds from the event to local charities. Such rejection of Black Friday could limit consumer spend on the event and create increased demand for Christmas spend. However, with news stories warning of potential delays in consumers receiving goods, we expect to see spend brought forward to earlier in December than in previous years.

We expect that online retail will continue to flourish, from supermarkets through to Amazon. With some of us regretting our lockdown purchases, (a recent report by Aviva identified hot tubs, pizza oven and bikes as some of the lockdown purchases that consumers now regret purchasing), eBay should do well as rueful consumers seek to offload their unwanted items (and given their increased advertising spend it would appear that eBay are well aware of the opportunity). Given the lockdown restrictions affecting retailers last year, in-store sales this year are likely to be up, but landlords need to proactively establish the value of the store in the journey to purchase to ensure the retention of occupier interest and make rents resilient to increased downward pressure.

Department stores will be hoping for a much better golden quarter than they had last year. With several high-profile closures, and the rationalising of the existing estate, we predict that there will be an improvement, but headwinds from online and supply-chain issues will mean that the bricks-and-mortar stores will not fare as well as they did pre-pandemic. John Lewis should do well, aided by better growth in Waitrose as consumers' strive for a more normal and festive Christmas this year. M&S, who performed badly last year, have already reversed their fortunes in the run-up to Christmas and we think that they will continue this run of form over the period, emerging as one of the top successes of the winter.

Subscriptions will prove popular this year, as consumers continue to gift experiences over material goods. A wide range of choice in the market, from baking, alcohol, crafts, toys and more, coupled with increased awareness and more advertising will drive uptake in this segment.

Homewares and DIY, one of the categories that did well during lockdown, is likely to see a tapering off in the exceptional demand experienced during lockdown, due to a combination of work already done and the squeeze of the cost of living making consumers reluctant to engage in large-scale home projects at this time.

Despite many manufactures releasing new electronic products, from a new Kindle, to phones, tablets, and computers, we predict only limited growth in this category. In fact, Apple's announcement that it will soon allow access to genuine Apple parts to allow for self-repair of their products could herald in a new cycle of frugality in terms of upgrading products. Gaming does however offer an opportunity to be a big Christmas winner, if new consoles from Microsoft and Sony, that are still in short supply, can be delivered to the market at scale.

We foresee that fashion, by and large a poor performer last year, will improve this year as meeting up – and dressing up – bounces back from last year. Despite the return to the office, it is anticipated that formalwear will not see a significant boost in sales, with the casualisation of the workplace uniform dovetailing with the Christmas party season.

The biggest winner this festive season though will be human contact. Meeting up with friends and family, following the success of the vaccine rollout, and the return of Christmas parties will hopefully lead to all of us having a less stressful and more fulfilled December than any number of material gifts could bring.

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Chris van Ryswyck