Mixed messages about the economy and concern about house prices
and the impact of public spending cuts are forcing retailers to
plan ahead for another cautious Christmas, according to retail
experts at PricewaterhouseCoopers LLP (PwC).
Despite reports of an increase in like-for-like sales in June,
the majority of retailers in the Midlands are once again planning
to stock moderately for Christmas to avoid the risk of being caught
out by potential dips in consumer confidence. To take advantage of
consumers seeking to spread their spending, many retailers are
preparing to launch their Christmas ranges as early as
possible.
Andy Lyon, retail expert at PricewaterhouseCoopers,
explains:
"It's a case of once bitten twice shy. Many retailers were
caught out in Christmas 2008 and left with goods that they were
unable to sell. In 2009, they stocked more conservatively and this
paid off with an improvement in profitability and they are expected
to take a similar approach this year."
Recent reports about house price volatility will be particularly
unsettling for consumers in the region. PwC's UK Economic Outlook
report, published in July 2010, stated that there was a 70% chance
that house prices would not have recovered to 2007 levels by 2015
in real terms and warned of a 'high degree of uncertainty over
future house price prospects'. The impact of imminent public sector
cuts on jobs in the sector is also a concern for many households in
the region.
By contrast, some consumers are feeling better off, enjoying
higher levels of disposable income than they were at the start of
2008, mainly due to the reduced cost of mortgages. For this group
of consumers, the prospect of a 2.5% increase in VAT in January
2011 could boost sales of big ticket items such as furniture, TVs
and cars prior to Christmas. However, this 'VAT-effect' is likely
to be muted by continuing uncertainty about the health of the UK
economy.
Andy Lyon, retail expert at PricewaterhouseCoopers, says:
"Consumers are getting a lot of mixed messages about the economy
and they are concerned about spending cuts and possible house price
movements. In such conditions, they are unlikely to increase their
spending in the run up to Christmas and retailers will be forced to
plan accordingly.
"We are heading for an austere Christmas. However, there will be
pockets of strong retail performance as consumers continue to look
for value for money by either shopping at value stores or by
selecting from value ranges. The comparatively low value of the
pound is also helping to boost tourism and luxury brand retailers
with a London presence are also expected to do well."