Deloitte has published its latest survey on the outlook for Xmas 2008 consumer spending. This eleventh edition of the survey covers 16 European countries and one African country, South Africa, whose patterns of consumer spending are comparable with the other countries surveyed. We have also performed a similar survey for the American market.

The year-end holidays, a key period for consumer spending, represent:

• An atypical period, during which consumers tend to set aside their usual purchasing behaviour and give free rein to their desires, depending on their current state of mind.
• An essential period for many consumer goods industries for which Xmas purchases can represent a “thirteenth month” of revenue.

The 2008 survey, which was carried out in this unstable environment, has the significant advantage of highlighting the new structural purchasing criteria adopted by consumers together with their expectations of retailers, products and brands. Determining the appropriate response to these expectations, by identifying the most effective levers, will be the key to liberating the underlying desire of consumers to go shopping, which is part and parcel of our country’s Xmas tradition.

Main reasons for spending less for Christmas in 2008

Slovakia 

Nearly half of Slovaks (like the European average) expect to spend less as a result of lower level of income.

Summary of the survey

A broadly optimistic consumer view of the economy in Slovakia

Our previous survey showed that certain West European countries, such as Great Britain, Ireland and Spain, stood out by the dynamism of their economies together with their optimism and strong appetite for consumer spending. Other countries, such as France and Portugal, were marked by weakening economies leading to already very muted purchasing intentions for the festive season.
This year’s survey shows that Europe as a whole has a common vision of the economy and the outlook for 2009. The fall has been all the steeper for those countries that were still doing well a year ago. But the negative view of the economic environment has been accentuated in the countries such as France, Italy, Spain and Portugal which were already pessimistic a year ago.
Eastern Europe (in particular Slovakia) appears more optimistic with 66% positive expectations of the economy given an overall level of consumer spending that has yet to mature.

A prudent Slovakian approach to spending

43% of Slovakians expect the economy to deteriorate in 2009 and believe they will have less or the same purchasing power than last year, even though as yet they have felt little direct impact from the financial crisis, which was only beginning at the time of our survey.
Within this mixed climate, 36% of Slovakians intend to increase their Xmas holiday gifts spending. This phenomenon has not yet hit Eastern Europe.

Higher food and fuel prices are the main reasons for moderating spending

54% of Slovakians have said that they will cut back their Xmas spending, due to increases in food prices and, rising energy costs. The recent fall in energy prices will doubtless have a positive effect when Xmas holiday-period shopping begins. However, the fear remains that as we approach year-end, the various price rises consumers have had to endure during the year will make them think twice before spending.
This trend is fairly widespread within Eastern Europe, with Western Europe once again having been more impacted by such increases.

Slovakians are exercising more self-control in reining in their consumer appetite

Slovakians want to go shopping this Xmas, but in a controlled manner in order to stay strictly within the budget they have set themselves. In fact, many more Europeans will be setting an Xmas shopping budget: 32% this year compared with only 24% last year, which means an increase in 33%.
This sign illustrates that consumers are wary of impulse buying, preferring to make carefully considered purchases in an uncertain economic period. This phenomenon is even more important in Western Europe.

On the look-out for useful products

Consumers are going to buy useful products to optimise their spending. Retailers that are able to satisfy this criterion and communicate accordingly over the Xmas period will be the winners. Buying something useful will help alleviate consumers’ feelings of guilt. Retailers must therefore satisfy the desire to consume while providing good reasons for doing so. They will need to focus on pre-Xmas special offers and purchases made after the holiday period, which account for 29% of all purchases in Slovakians, in order to capture this market.

Increasingly, Slovakians are looking for the best value for money

The quest for the best value for money is illustrated by the primary use of Internet in Slovakia: comparing prices. This trend is particularly noticeable in the countries of Western Europe, while those of Eastern Europe have not yet reached the same level of Internet penetration.
It should be noted that over the atypical Xmas period, during which day-to-day living has to be improved, seeking the lowest price is not consumers’ sole concern, since they are also looking for quality.

Sustainable development at a time of economic crisis

A majority of Slovakians still declare that they are prepared to pay more for a gift provided they can be sure that it complies with ethical production standards (56%).
Thus, less than 1 Slovakians in 3 questioned during the survey stated that obtaining the best price was the priority, regardless of the conditions in which the product was manufactured.

Spending decisions will not involve trade off between gifts and food

Contrary to the western Europe countries, Slovakia like many Eastern countries will maintain the same level of spending. In all, notwithstanding any events occurring since the survey was conducted, rough estimates point to a decline in expenditure in Slovakia of around 0.5%, chiefly impacting gifts (+6%) and food products (+0.4%).

Wish-lists differ from one country to another with books top of the list

Depending on cultures and the degree of economic development, gift preferences vary from one country to another. Slovakians are whishing and buying traditional gifts.
The demand for gifts in the form of money and gift vouchers continues to rise. This reflects a persistent desire on the part of Europeans to make their own gift choices or simply to have money to cover everyday expenses. Demand for gift vouchers, which are currently not very popular in Eastern Europe, will increase sharply in
the future.

Electronic toys and mobile phone are popular with young children

Although the market is still dominated by traditional toys, more and more electronic toys and consoles are making their appearance as gifts to be offered by adults to children. There are two trends: Western Europe where electronic games and consoles are gaining momentum whereas Eastern Europe still prefers traditional games.

European consumers intend to change their food purchasing habits for the end-of-year festivities in response to their worries about prices

It must be stressed that the retail distribution networks differ in their characteristics from one West European country to another and even more so in the case of Eastern Europe, where modern forms of distribution are expanding.

Traditional department stores are leading in Slovakia

Even if traditional department stores are firstly chosen by Slovakians consumers, hypermarkets and supermarkets come next in the ranking of their choices.

Consumers are looking for information

The internet is increasingly popular as a source of information, a trend reflecting consumers’ increased (but still inadequately satisfied) preoccupation with obtaining more point-of-sale information when doing their shopping. Providing a response to this consumer expectation remains a potential source of differentiation for all retail distributors.
It may be noted that the traditional distributors have had, depending on the country, varying degrees of success in establishing website marketing (and the ensuing synergies) as a complement to their shops.

About the survey

Deloitte realised the survey about the consumption during year-end period in 16 countries from Western Europe, East Europe, and in South Africa. The fieldwork was executed in September 2008 (last week) & October 2008 (first week). The study has been conducted during the financial crisis. However respondents had in mind governments emergency plans, and bank takeover to prevent bankruptcy.

Respondents are aged 18 years and older. Information has been collected via internet, phone and with a structured questionnaire for a sample of individuals, within controlled panels. For two countries we have conducted the survey face to face (Russia and Ukraine).

Related links

Press release: Christmas 2008: Eastern Europe stays optimistic despite an unknown economic future.