Cautious shoppers seek value for money

Countdown to Christmas: Small retailers are losing out to out- of-town stores in battle for consumers' cash

Shops are having an austere "value for money" Christmas, with manufacturers and retailers facing a tough battle to persuade Britain's consumers to part with their money.

Electronic goods manufacturers are offering customers up to pounds 1,000 free software to tempt people to buy their brand, and mobile phone companies have abandoned gimmicks in favour of money-back offers and low call charges in their advertising campaigns.

According to the British Retail Consortium, "people are giving useful presents this year, rather than throw-away gifts". A spokeswoman said: "They are also buying things that are not overly expensive. And if they spend more money it's only because they perceive it as being better value rather than being lavish."

Consumers are going for the best possible choice which means while big stores and out-of-centre shopping centres prosper, small retailers are losing out. The Metrocentre in Gateshead, which has 340 outlets, is attracting about 750,000 visitors compared to the usual 600,000, and the Lakeside shopping centre in Essex has seen visitor numbers rise 10 per cent - to 650,000.

Sally Collinson, of the Oxford Street Traders' Association, said that the big stores in Oxford Street were doing well. Selfridges' sales were up more than 10 per cent and shops such as John Lewis, Debenhams and Marks & Spencer had sales up nearly that high.

"We put it down to the fact that the tourist trade now lasts 12 months a year," said Ms Collinson. "The pound is fairly weak and so we're doing quite well with the foreign travellers we attract."

But Chris Greenall, head of policy at the British Chamber of Commerce, warned that smaller retailers could find themselves squeezed out. "For small retailers the times are very hard. I think it's difficult because they don't have the diversity. People are willing to drive for two hours to an out-of-town shopping centre because they want the choice. It's not a price thing," he said.

Computers are "the Christmas gift this year", according to John Clare, chief executive of Dixons. The number of PCs has grown by 15 to 20 per cent over the last three years and for those sold for home use the percentage is even higher. It is a fiercely competitive market though, with most purchases costing over pounds 1,000.

This week - the peak week for sales - Dixons expect to sell 10,000 personal computers. "There have been high sales throughout the year since the launch of Windows 1995 in August," Mr Clare said.

The one that has proved the greatest giveaway is Packard Bell's 901S Multimedia priced at pounds 1,199 including VAT, whose free software, Mr Clare said, was valued at about pounds 1,000.

"It's not unknown to give out software with a computer but this amount is the most I think that has been packaged with a PC," he said. The package includes educational programs to teach Spanish and French, and reference programs, including encyclopaedias to encourage parents with young children.

But the toughest war continues to be waged between the computer games giants Sony and Sega. Sony claims it will sell 130,000 Playstations - its new generation 32-bit system costing pounds 299 before Christmas.

"We've beaten Sega and Nintendo to become the market leaders," said Simon Jobling, head of marketing. "We're outselling them three to one and we now dominate the market in a unique way."

Sega officials, however, are not ready to surrender. They claim that they will sell 80,000 to 85,000 units and remain sceptical about Sony's prediction. "They may well say that about theirs but we couldn't possibly comment," said Jeremy Crisp, product group manager.

The computer-games empire is worth pounds 600m in the United Kingdom alone and the amount both companies are spending on advertising is phenomenal. Sony has put aside pounds 20m over an 18-month period, installing Playstations in places like the trendy Ministry of Sound nightclub, south London, and the Pleasure Beach, Blackpool. Sega, which is spending pounds 5m, claims to be more "creative" in its advertising, by organising events such as projecting images of John Major and John Redwood as Virtual Fighters on the House of Commons.

But one area that seems to have escaped the austere atmosphere is the hamper trade. Harrods has sold 60,000 hampers to date - an increase of 25 per cent on last year. It has even shifted 150 of the Supreme hampers, which at pounds 1,000 include a magnum of vintage champagne, Beluga caviar, smoked salmon and Belgian chocolates. Fortnum and Mason would not reveal its percentage rise, but expects to sell 80,000 hampers - costing up to pounds 1,000 before Christmas.

Finally, one traditional battle remains - that of the Christmas No 1 single, which been won in the past by Cliff Richard. Slade and East 17.

This year, Michael Jackson seems to have fought off the Beatles' new single "Free As A Bird" to keep the top slot this week with "Earth Song".

But the multi-millionaire superstar faces his strongest challenge, not from the Fab Four or another supergroup, but a 13-strong combo whose record was first played on Radio 1 as a joke.

Mike Flower's Pops will release an "easy listening" version of the Oasis hit "Wonderwall" today.

Their record company, London Records, claim that with 270,000 singles pre- ordered the group may well overtake the mighty Jackson.