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In a nationally representative study conducted by Vypr, around nine in 10 people are concerned about Christmas costs, with 56% saying they are very concerned and 33% feeling moderately concerned.
This is largely due to the continued inflation rises, with the rate now sitting at 11.1%, the highest in 41 years. Energy costs are increasingly worrying, with retailers and consumers alike struggling to keep the heating on.
The impact on indies
Inflation is a real concern for retailers. As Andrew Goodacre, CEO of the British Independent Retail Association, explained, “The government needs to recognise that increasing business cost will fuel inflation and so more must be done to reduce the burden on business, who in turn will take steps to reduce the prices for consumers.”
In fact, 92% of SMEs say that rising costs are impacting their profitability – and 32% say it is a big problem, a new survey by Moore UK has revealed.
By far the biggest problem for SMEs is the increasing cost of energy, with 55% of them saying it is the issue they are most concerned about. This ranks a long way ahead of the cost of petrol and diesel (34%) in second place.
Maureen Penfold, chair of Moore UK, explained, “With inflation still rising, SMEs are under a huge amount of pressure. The cost of energy is a major pain point for virtually every business. For some, it is going to test their ability to survive.
“The Autumn Statement didn’t provide the good news that they were looking for – it’s going to be a long winter for a lot of smaller businesses.”
But indie retailers aren’t passing on the full cost increases to their customers. As Floortje Hoette, chief executive of Produced in Kent, explained, “Unfortunately, right now many of our members are calculating the cost of being in business and it’s just not stacking up; the cost of ingredients, the lack of skilled staff and the cost of energy are tipping them over the edge.
“With customers already looking at cutting their expenditure, passing those costs on is simply not viable.”
Changing consumer behaviour
It is still difficult to tell how shoppers will treat the festive trading period as we enter December, but there is evidence that they will be stocking up earlier this year.
With concern over rising costs, 44% of people surveyed by Vypr said they had already started their Christmas shopping. Most said that they were beginning sooner for economic reasons, particularly to spread the cost of Christmas over a longer period. Some were also buying early because they saw something on offer and decided to stock up in case of a shortage nearer to Christmas.
One way to keep on top of this consumer trend is to make sure you don’t overfill shelves and keep enough stock back to last throughout the month.
For Ben Davies, consumer intelligence expert and founder at Vypr, “We’re in the midst of a second ‘once-in-a-generation’ crisis in the space of three years, and it’s clear that consumers are feeling worn down, whilst being highly anxious about household budgets as we approach Christmas.
In fact, according to new research from Mintel, over half (54%) of Brits say financial concerns mean they plan to keep a stricter budget this year compared to 2021.
This is something Helen Dickenson, CEO of the British Retail Consortium, warned, as she commented, “While there are signs that cost pressures, and price rises, might start to ease in 2023, Christmas cheer will be dampened this year as households cut back on seasonal spending in order to prioritise the essentials.”
But Nick Carroll, category director of Mintel Retail Insights, believes that consumers will still want to have a good Christmas.
“We’ve long held the view that the festive retail performance is governed more by how consumers presently feel about their finances than how they view the coming year – with consumers willing to make sacrifices to have a good Christmas.
“However, the uncertainty felt by many at present, and for what the coming year may bring, means the wider economic picture will be hard to ignore this Christmas and will govern the spending decisions of most consumers.
“For lower-income households, these concerns are likely to be founded in the here and now, with cutting back not a choice but a reality of the present environment. However, promotional activity and the wider proliferation of credit and buy-now-pay-later will help many shoppers manage their Christmas spending.
“While higher-income households may find their present situation to be more manageable, their concerns will be focused on 2023 and the pressures the future holds. Regardless of the motivating force, it’s inevitable that a significant number of shoppers will be cutting back this Christmas”, he concluded.