Rise in living costs to cut into Christmas spending

The run-up to the holiday season is well underway, with retailers predicting a lacklustre Christmas as soaring inflation digs into consumer purse strings.

While the end of the year is meant to be a bonanza for retailers and brands, companies from Adidas to Asos are cuttings their forecasts, with H&M responding to the current crisis by launching a cost-saving exercise of 177 million dollars.

Data from Reuters says the European retail sector has tanked 40 percent on the stock market. “Consumers are under a lot of pressure and are going to reduce some of the discretionary spending, while costs for retailers are going up,” Ciaran Callaghan, head of European equity research at Amundi, Europe’s biggest asset manager, told Reuters.

Investors and strategists expect retailers’ margins to be squeezed well into next year as cost pressures are further exacerbated by weakening currencies and collapsing consumer demand.

Spending less this Christmas

Market research firm Kantar said half of Britons expend to spend less on Christmas this year compared to last year. In its survey 37 percent said they were struggling with their financial situations, a figure that will no doubt impact retailers this Christmas. Kantar also said one in three of those planning to spend less would cut gift budgets for family and close friends by more than 25 pounds per person.

“It’s been another tough year for many people and brands need to be careful to get the right tone this Christmas,” said Kantar head of creative excellence Lynne Deason.

“We’ve seen a significant jump in the number of consumers who are worried about money and the emphasis for many will likely be on getting back to the true meaning of the festive season, focusing on togetherness, kindness and generosity.”

“Brands must be sensitive to this emotional context and the reality of people’s financial positions, particularly in their advertising campaigns. There’s been a clear shift in public sentiment around Christmas ads and brands will need to balance celebration and excess in their content in 2022.”

Articles sources: Reuters, Retail Gazette Blog