Christmas sales to hold firm, but 2010 will be tough, says Deloitte

RETAIL spending this Christmas will be at a similar level to last year, but sales will fall 1.5% in 2010 as unemployment rises, a survey said today.

The Retail Review, Changing Habits, Shifting Patterns produced by business advisers Deloitte also reveals a shift in consumer behaviour in the North West this year, with shopper spending more on food and groceries and less on luxury goods.

The survey reveals that nearly three quarters of people in the region (74%) are spending the same or more on food and groceries than last year; 39% spend less on clothing and 48% have trimmed spending on entertainment and leisure.

Richard Hyman, strategic retail adviser to Deloitte, said: “We believe total retail spend for the final quarter of 2009 will come in just below the same period last year, but the Christmas month will be slightly up. 

“Next year, expected increases in unemployment, the impact of higher taxes and increased National Insurance payments will take their toll on retail sales and we forecast a slight fall of 1.5% in 2010.”

In the face of the worse recession since the 1930s, Mr Hyman says the performance of the retail sector has been “outstanding”.

While food and grocery sales have performed strongly, so called ‘wants-driven’ spending has been hit.

Sharon Fraser, partner and head of retail at Deloitte in the North West, said: “The region’s consumers are gravitating to the grocers.  The increasing number of budget or own-label products has been a winner for the supermarkets who have also taken over from traditional high-street chains as the country’s biggest clothing retailers.

“Now more than ever, non-food retailers need to focus on the relevance of their products and differentiation from their competitors.”

Shopppers are increasingly more savvy and price aware, thanks to the choice afforded to them by the Internet.

The survey also proves that consumers have traded down, with 54% buying cheaper or non-branded products compared with last year.

Ms Fraser added: “In the immediate future people remain cautious about their spending power, but there is something more fundamental at play here too.

“These changes in behaviour have not happened suddenly, they have evolved over a period of time and mostly before the credit crunch. 

“So talk of a ‘new consumer’ in our view is over done.  The digital age has made information available 24/7 and now, anyone with the internet has the ability to research products, prices and opinions and with mobile technology this can be done on the go. This has created an unprecedented level of transparency. ”

Matthew Davies, the boss of successful retailer Pets At Home, will speak at a Deloitte event in Manchester this evening, where the findings of the report will be discussed.