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Business Analysis & Features

December may not redeem high-street sales

Christmas could turn out to be a disappointment for struggling retailers

Twenty-seven shopping days to Christmas – including Sundays – and canny, cash-strapped consumers are watching and waiting to see which of their favourite retailers are going to roll out the best deals.

Even John Lewis is struggling, reporting sales down 3.2 per cent on the same week last year, although toys and technology products for children are doing well.

But while Britons are expected to spend between 1 and 2 per cent more this Christmas than last, our 5 per cent inflation means they will get somewhat less for their money.

At Verdict Research, Maureen Hinton, a retail analyst, paints a picture of unrelenting bad news. "Everything is working against retailers this year," she says. "There is inflation, rising utility and high transport costs, weak growth, increasing unemployment and the prospect of another global financial meltdown."

No surprise then that consumer confidence is at one of its lowest levels since 2008, with more than half those surveyed feeling worse off than this time last year. Families are coping with static wages trailing behind inflation, increasing unem-ployment, and a growing number of young people without jobs – a million at the last count – many of them living at home. As house prices sink, or at best stay the same, those who own their own homes are feeling poorer by the day while private renting is becoming increasingly expensive.

In response, many retailers are offering timed discounts on selected items or having short sales – or billed as short – in a frantic effort to persuade shoppers to buy now. Marks & Spencer was offering 25 per cent off hats, gloves and scarves last week, while in Knightsbridge, Harrods is having a 10 per cent off weekend for store card-holders to kick-start – it hopes – the Christmas season.

At Shore Capital, however, analyst Clive Black believes that although retailers will have a hard time whatever they do, the quality stores will do best. In addition, "we expect that depressed sales in October and November will be followed by a surprisingly good December, but that January will be flat despite the sales."

The main problem for retailers and customers is the uncertainty, both personal and for the economy in general. The result is a customer looking for good value, who is spending from reduced disposable income and dipping into savings rather than running up credit-card bills.

Smaller-ticket items such as cosmetics should do well, as cheering items such as nail varnish and lipstick are always welcome in a stocking. Books and music will be popular, but with much of it being downloaded, rather than arriving in solid form.

Online retailing continues to be the one sunny story, going from a standing start 11 years ago to between 10 and 15 per cent of the total spend, depending on who you talk to. Sales so far are up 14 per cent on this time last year, says IMRG, the online retailing association, while nearly a quarter of smartphone-owners are using their phones to buy goods online. There has also been a sharp rise in purchases through Facebook, and Apple has overtaken Amazon as IMRG's "hot shop" for the first time ever.

So expect presents this Christmas, but just not quite so many.