We have an interesting retail dichotomy here in Australia. Christmas seems to start earlier every year, particularly as shoppers go online for gifts at better prices from both home and abroad. At the same time, Christmas extends for longer each year with last-minute spending accounting for a more concentrated and tense trading period in the final two weeks. With the heavy trading January sales, the Christmas shopping period now takes up a third of the year!
Retail analyst Peter Ryan talks of the ‘donut effect’, where Christmas trading kicks off early in October, then falls away sharply late in November. As retailers panic, the discounting begins in an attempt to lure customers back before Christmas. Whilst they do return, he argues this has nothing to do with the discounts that fill the shopping malls, but the fact that it is Christmas … and Santa’s deadline cannot be changed.
This pattern of Christmas trading has emerged very recently and means that retailers need to keep a closer eye than ever before on the behavior of their customers. In the US, Target launched its 2012 Christmas ad campaign in early October, setting a new record for early advertising. In contrast, it was only two years ago that Target purposely held off its Christmas advertising until late November. So much has changed in two years, primarily driven by the advent of online shopping, that Target has completely shifted its thinking in a relatively short period of time.
Of course there are many factors that influence the timing of the trading highs and lows, the retail channel and particularly the size of the Christmas spend each year. But this year, the size and shape of Christmas trading seems more difficult to forecast, given the backdrop of some major retail influences and changes.
While we’ve had some genuine entries in to the online arena by the traditional retail giants, Australia still lags behind other countries in terms of online retail development, with online sales at just over 5% of total retail sales. This compares with 8% in the US and 9.4% in the UK, but we are making progress.
There is clearly a hunger for online sales as approximately 25% of all online retail sales are to sites outside of Australia – fuelled by a very strong dollar and helped by taxation laws. The response to Click Frenzy this week is further evidence that Australians are ready, willing and able to shop online – retailers just need to give them ample opportunity.
So what are the opportunities for retailers this Christmas, and how do they leverage them for greatest return?
Firstly, regardless of whether people end up purchasing online or in store, they will use their mobile devices to conduct research. Sites like ShopWiki collate data from nearly 6,000 Australian stores and compares prices instantly. It’s a given that if there’s a more competitive price out there, your customer is likely to find it. So if you can’t compete on price alone, you need to offer some other value-add to your customer AND your online presence needs to clearly convey what that is so they don’t click through to your competitor.
This “value-add” could be speed of delivery, exceptional customer service, or exclusive added extras that the customer can only get from you. Even just offering beautiful gift wrapping! People are shopping in advance, so have gift packs and ideas on display early on, either virtually or in the physical store, and make the shopping experience easy and enjoyable for your customers.
On an emotional front, traditional retailers have a great opportunity to lure shoppers with festive décor, ambiance and a spirit of goodwill that converts to sales. In the somewhat inert world that is online shopping, the experience of going into town and making the Christmas shop an occasion for the family is a tradition that should not be ignored. Soaking up the Christmas atmosphere, hearing ‘Jingle Bells’ play and being able to shake Santa’s hand at the retail store cannot be replaced.
Finally, smart retailers should think ahead to how they can leverage Christmas to set themselves up for a bumper year in 2013. What can you offer at Christmas that will ‘bounce’ your customers back to you in January – and beyond? Be it special discounts for Christmas shoppers to redeem next year, collecting subscriptions to your loyalty programs, or building a database of interested shoppers that you can continue to communicate with throughout 2013, there are many ways that you can make Christmas last all year round.
Head of Shopper & Retail Strategy