Retailers forced to adapt as savvy consumers search for cost savings

60% of consumers setting budgets this Christmas

Work colleagues the big losers in gift cull

Irish consumers will spend on average 5.3% less this Christmas compared with last year according to the annual Deloitte consumer survey of Christmas spending. Coupled with this, a current inflation rate of 4.3%  means that consumers’ spending power will, in effect, be reduced by nearly 10%.

Despite this, Ireland still remains the biggest spender in Europe at Christmas, ahead of the UK in second position and Spain in third. This year’s survey shows that the yuletide spend will fall in most Western European countries, while consumers in Eastern Europe will increase their spend.

The survey, which was carried out in September and October during the height of the financial crisis, shows that the average spend per household in Ireland will be €1354. Of this, €668 will be spent on gifts, €422 will be spent on food, and €264 spent on socialising. On average spending will fall by approximately 7.2% on gifts and by 2% on food.  Last year, the average household figure was €1,431 which represented an increase of 6.9% on 2006.

When questioned on the economic outlook, there was a marked shift in confidence from last year. In fact:
• 93% of respondents accept that the economy is in recession compared with 33% last year. Furthermore, 71% believe the economy will deteriorate further in 2009
• Only 45% feel secure about their job prospects compared with 75% last year
• 55% do not consider the political and governmental situation to be stable in Ireland
• 47% believe their household’s financial position will deteriorate in the next 12 months, with 6 out of 10 asserting they have already suffered a loss of spending power

Commenting on the figures, Susan Birrell, Consumer Business Partner, Deloitte said: “Last year, the survey found that consumers were still willing to spend despite a gloomier outlook on the economy. This year, that outlook has deteriorated even further and the purse strings are finally being pulled tight. Irish consumers will still spend this Christmas but how much and how they spend will reflect the economic reality now facing them.  60% of respondents (compared with 26% in 2007) outlined their intention to set a budget to get a better grip on their holiday spending and over half will reduce their level of spending following the financial crisis. The main reasons cited by consumers for spending less are higher energy costs (58%) and fewer savings in the bank (also 58%).”

Retailers’ challenge as shopping behaviour changes

Retailers hoping to bolster sales in what has been a challenging year will need to be aware of the ways in which consumers are changing their purchasing behaviour and planning to make savings. 35% of respondents outlined that they have already taken advantage of sales in advance of Christmas to buy gifts and 17% intend to make purchases in post Christmas sales. 61% of respondents intend to buy products and gifts on promotion and 53% will buy less luxury gifts.

Birrell commented: “Irish consumers are changing their purchasing patterns considerably -and are becoming increasingly prudent and savvy in their approach to Christmas shopping. Now more than ever they will be looking for value for money. In fact, this year, 60% of people will devote more time looking for the best price.

“In order to optimise their share of the Christmas spend, which is still very significant, retailers should be cognisant of the fact that this year’s festive shopper is very different to last year’s. They will need to develop innovative and creative propositions that match consumers’ needs. Considerations should include the optimum timing of promotions in addition to deciding on the most appropriate product mix i.e. the best value for money for the right products. Those that manage this will be the winners this festive season – and will hopefully ensure that spend stays in the local economy.”

In order to achieve further savings, nearly half of respondents said that they will be buying fewer gifts, with colleagues being identified as the people whose presents will be most sacrificed!

Christmas Wishlists

Books (57%), music (51%) and clothes (51%) are the most favoured presents adults in Ireland would like to receive this year – and broadly reflect the presents they prefer to buy (Music 53%, books 50%). However gift vouchers continue to be a popular choice with present buyers – 48% of respondents are most likely to buy these as presents, with multi-store gift vouchers proving the most popular.

The Nintendo Wii tops the wish list for the under 12s, with other games consoles and computer games also proving popular. Cold hard cash is the most desired gift for their teenage counterparts, followed by computer games and music. 

Discount Retailers set for growth

With regard to food purchases, the rise of the discount store continues. 14% will buy their food in these stores, compared with 7% last year. In addition 49% intend to buy more at these stores this festive season. Overall, however 71% of people will buy their Christmas food in supermarkets. Product range (41%) and value for money (40%) are the main factors in deciding where food purchased will be made.
 
With regards to holiday products, supermarkets (59%) and speciality chains (54%) take first and second position as the preferred locations for buying gifts, with the traditional department store now in third position (52%). 40% indicated that they plan to buy gifts on internet web shops.
 
Online festive behaviour

The internet will most likely be used by Irish consumers as a price comparison tool. 31% of respondents who will use the internet will do so to research and compare prices, with 27% saying that they will use the web to buy products and services. This figure is down on last year when 36% of respondents said that they would buy over the internet.

The main reasons outlined for shopping online include more product choice (40%) and to avoid crowded stores (25%). By far, the most popular websites for purchasing gifts are online trading sites, identified by 53% of respondents. Music (70%), books (57%) and DVDs (46%) are the most popular items bought online.

Ends

Notes to editors

About the research

This is the seventh year Ireland has participated in the Deloitte Annual Christmas Spending survey. This year’s survey was performed during the last week of September and the first week of October. Respondents are aged 18 years and older. Information has been collected via internet, with a structured questionnaire for a sample of individuals, within controlled panels. Each consumer in the panel is identified through the following dimensions: Socio-demographic, personal interests and consumer behaviour.  The survey was carried out in 17 countries. The sample size in Ireland was 672.

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