As the ‘golden quarter’ begins, online retailers are reported to be concerned about sales, while value retailers are seeing sales pulled forward.
Data from Barclays Corporate Banking has revealed that value and discount retailers are confident of a strong Q4, despite customers feeling the effects of the cost of living crisis.
The research shows that 86% of discount retailers say they are confident of growth before the end of the year, with sales boosted by consumers already shopping early for Christmas. When asked about anticipated growth, 86% of discount retailers responded positively, however only 78% of high value retailers and 76% of mid-range retailers shared this confidence.
Barclays Corporate Banking head of Retail and Wholesale, Karen Johnson, said: “This year, as rising costs place a squeeze on consumer spending as well as business profitability, it looks as though retailers operating at a lower price point will benefit most. Shoppers will be hungry for deals across the festive period.”
Barclays’ research found that, on average, consumers are looking to reduce spending across all retail categories by between 25% and 30% due to the rising cost-of-living.
Speaking to the Retail Gazette, Wilko chief executive Jerome Saint-Marc, commented: “We know things are difficult right now for our customers and team members, and offering great value has never been more important. While we anticipate even more tough times ahead, we also know that customers are excited to celebrate their first ‘normal’ Christmas in three years and we’re well placed to deliver it for them.”
In the online space, Amazon has just reported a return to profitability after two consecutive quarters of losses this year, but said it anticipates weaker Q4 sales. The company said it expects revenue for the fourth quarter to be up between 2% – 8% compared with the fourth quarter of last year.
Amazon’s results, which traditionally represent a bellwether for the eCommerce industry, included a warning that sales in Europe had been particularly hard hit by the economic turbulence affecting consumers, as well as rising delivery costs.
The retailer said it made a profit of $2.9b for the three-month period that ended on September 30th; a decline compared with a profit of $3.15b during the same period a year ago.
Amazon CEO Andy Jassy said: “There is obviously a lot happening in the macroeconomic environment, and we’ll balance our investments to be more streamlined without compromising our key long-term, strategic bets. What won’t change is our maniacal focus on the customer experience, and we feel confident that we’re ready to deliver a great experience for customers this holiday shopping season.”
Barclay’s research also revealed that 38% of discount stores stated that festive shopping had begun before the end of September; high value retailers put this figure at 25% and mid-range retailers at 21%. Meanwhile, 75% of value retailers said they plan to offer Black Friday discounts, ahead of the sector average of 71%.
Wilko’s Jerome Saint-Marc added: “Festive trading, which for us begins with Halloween, started even earlier this year. We’re seeing customers plan ahead and budget for occasions and our sales have been encouraging. We’re ahead of forecast by more than 30% for Christmas.”
Barclay’s Karen Johnson said: “It’s not only about price. The leaders of discount and value retail firms are also adapting their business models to ensure they appeal to the British public in the strongest possible way. This includes re-evaluating where their stores are based, investing in eCommerce technology and catering to popular forms of hybrid shopping such as click-and-collect.”
