Five reasons to be optimistic about Christmas trading this year

Tony Featherstone

Will it be Season’s Greetings or a seasonal beating for retailers this Christmas? After being kicked by Bad Santa over the past few years, retailers are sweating on a much improved holiday trading season. Early signs are promising.

Nobody should expect a trading bonanza. Australia’s sluggish economic growth is hardly the backdrop for booming Christmas trade. And the Reserve Bank’s decision not to cut interest rates in November – and banks independently lifting interest rates – could slow the economy further. Record-low wages growth is another concern.

But there’s enough to suggest consumers will cautiously look through the gloom and spend a little more this Christmas. For savvy retailers who plan well for Christmas and ensure  business hums in December, even a small lift in spending can make a huge difference.

Here are five reasons to be more optimistic about Christmas trading in 2015.

Consumers are cheerier

Westpac described the result of its latest consumer confidence survey as a “cracker”. Consumer sentiment rose 3.9 per cent in November, driving the index to its highest point since January 2014, according to the Westpac/Melbourne Institute Index of Consumer Sentiment. Leadership changes in Canberra and Prime Minister Malcolm Turnbull’s high personal rating approval are clearly boosting sentiment. It’s too early to call a trend, but the signs are good.

For savvy retailers who plan well for Christmas and ensure  business hums in December, even a small lift in spending can make a huge difference.

Christmas spending intentions are on the rise

The same Westpac survey identified an increase in potential Christmas spending. About 17 per cent of respondents said they expected to spend more on gifts this year, compared to a longstanding average of 12 per cent. “This survey shows the most positive mix of Christmas spending plans since we began running this special question in 2009 – a very encouraging sign in the lead-up to the holiday period,” states the survey.

Employment is growing

Latest employment figures also strengthen the case for brisk Christmas trading. Total employment, up 58,600 in October, was the strongest monthly gain since March 2012 and the unemployment rate fell from 6.2 per cent in September to 5.9 per cent. If the job figures are to be believed (the Australian Bureaus of Statistics has had its share of forecasting problems in the labour market), employment is growing faster than most economists expected. Nothing gets people spending more at Christmas than job security.

Hot in the summer

Never underestimate the weather’s effect on retailing. A warmer-than-expected winter can crush retailers stocked with warm clothing, just as a cool summer can hurt. Courtesy of the El Nino effect, this year’s summer looks like a stinker. Expect consumers to scurry for air conditioners, summer clothing and spend time in shopping centres to avoid the heat.

Events galore

Big events are becoming more important to help retail cash registers sing over Christmas. Consider the effect of the upcoming Star Wars movie on toy sales at department stores. Or the launch of new electronic products and gadgets at retailers such as JB Hi-Fi. More blockbuster events this summer, and a hot summer (to a point) should encourage people to get out of the house, seek entertainment, and spend extra in December and into January.

By Tony Featherstone

Tony Featherstone is a former managing editor of BRW and Shares magazines.

Image: Harry Lawford, Flickr Creative Commons license