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Deloitte: Retailers approach Christmas with less cheer

Only 62% of retailers expect to see higher sales this Christmas compared to last year, down from 80% in 2018, according to the Deloitte Retailers Christmas Survey, while 72% expect positive sales growth in calendar year 2020, down from more than 90% for 2019.

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Further, just under 40% of retailers surveyed expect some form of margin decline and 39% said they will be discounting pre-Christmas to help drive sales.

In more positive news, more than half (58%) expect to see growth of 10% or more in online Christmas sales.

Deloitte Retail, Wholesale and Distribution national leader, David White said it’s been a tough year for many retailers with 47% of survey respondents experiencing flat or negative sales growth over the last 12 months.

“Just over 60% are expecting to increase their sales this Christmas, and nearly 40% are expecting to see a decrease in seasonal margins. Unfortunately, this is the most pessimistic we have seen retailers since 2013,” he said.

“Many pinned their hopes on federal government tax cuts, but the latest trading data suggests consumers have chosen to keep any windfall in their pockets. Retailers are no doubt hoping they have been saving up for Christmas. With the proliferation of sales campaigns such as Black Friday leading into December, many retailers are concerned this could bring forward Christmas trading at discounted prices.”

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Another key survey finding was that over a quarter of respondents highlighted customer service as the most important driver of sales this Christmas, just behind digital and omni-channel offerings.

“These two strategies aren’t mutually exclusive. Forming a strong digital connection with the consumer is critical to building trust in the brand, regardless of where the customer spends, and this connection to the customer flows through to loyalty.

“Over 90% of respondents consider their customer loyalty as good or strong, but brand loyalty is also hard won and easily lost. In the era of cancel culture, retailers need to understand the reasons when things go wrong, and how dealing with a poor customer experience via exceptional customer service can protect, and even enhance, brand reputation and the value this can deliver.”

Looking ahead to 2020, most survey respondents forecasted growth of less than 5% with new products and online remaining key with only 11% of retailers expecting to grow through new store openings, down from a peak of 43% in 2017.

“Rising input costs following the depreciation of the Australian dollar are also expected to bite when it comes to margins, and respondents continue to look to the likes of property costs as levers to reduce bottom line impacts.

“It’s certainly critical that within the retail ecosystem, retailers, suppliers and landlords work together, rather than against each other.

“Ultimately, uncertainty kills confidence, and global economic turbulence certainly isn’t helping. Australian retailers will be waiting for a recovery in wage and jobs growth to provide a boost where interest rates and government tax cuts fail to provide the stimulus needed.”

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