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Garden & DIY sector to be hardest hit this Christmas

UK consumers are set to spend more this Christmas than they did last year but due to inflationary pressures the volume of goods purchased will actually fall, according to research released today.

Research analysts Verdict and business analytics firm SAS predict that around £86.5 billion will be spent by UK households in the final quarter of the calendar year, an increase of £1.2 billion year-on-year, however the volume of purchase will decline 0.7 per cent as shoppers look to cut back due to rising bills and high unemployment.

Of all the sectors in retail, DIY & gardening is to be the worst affected by the dampened consumer mood, with people prioritising essential spending ahead of home improvements resulting in a 6.3 per cent decline in expenditure according to Verdict.

Comparable sales of furniture & floor coverings will be similarly affected by this consumer trend and the rush by some to purchase big ticket items in Q4 last year before the VAT rise, meaning spending in this sector is expected to fall five per cent.

Maureen Hinton, analyst at Verdict, commented: “UK retailers face one of the most challenging Christmases ever as a combination of low consumer confidence and inflation is making shoppers question every purchase they make, even at a time when they want to celebrate.

“All the growth in the market is inflation led and a repeat of last year’s bad weather would be disastrous for retailers who are already on very tight margins.”

Exceptionally heavy snowfall in the run-up to Christmas last year severely affected product deliveries which already had the added stress of the seasonal rush and surge in online spending to contend with, and businesses will be hoping there is no repeat of those meteorological conditions in the coming months.

In order to maximise their take of a diminishing overall spend, retailers are being advised by Verdict & SAS to target men more effectively over the festive period after they found that 56.5 per cent of all turkeys bought in the week preceding Christmas were done so by males.

“The data clearly shows that retailers ought to be actively targeting men, for whom Christmas is one of the big shopping windows,” Hinton continued.

“After a tough 2011 many retailers will be relying on Christmas to make a profit before being hit hard by a tough Q1 in 2012. Consumers will cut back as they recover from Christmas spending and face increased utility bills and high unemployment.

“Therefore retailers must build up enough cash and margin to support them through difficult trading until the next likely boost in spending, Easter.”

Grocery and health & beauty sales are expected to stay fairly resilient in the fourth quarter, whilst clothing & footwear should benefit from extra gift trading as consumers steer away from large products for presents.

Homewares and electricals will remain strong categories for Christmas presents but higher costs and increased promotions will eat away at businesses margins, whilst book, music & video retailers will continue to suffer from the gradual fall off in physical products sales.

Source : Jon Whiteaker – Retail Gazette

11 November 2011
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