The ARA held it’s annual Christmas Insights breakfast, with industry experts from MST Marquee, Roy Morgan, Afterpay and Mastercard presenting their consumer spending predictions for the Christmas season.
Michele Levine, CEO Roy Morgan advised that with some of the more conservative predications floating around, the focus for retailers will be to take these numbers as a challenge and go ahead and beat them. The Roy Morgan Christmas sales forecast currently is predicted at around $78 billion, which includes Black Friday and Cyber Monday. “The good news is that the sales are expected to perform even better the closer we get to Christmas”.
“Consumers are moving forward this year with ‘necessity spending’ – they want to purchase something special and really useful. It’s important to have gorgeous high-value products that people will fall in love with, in the basic range as they will be shopping for value”.
“This week’s consumer confidence is up to 80.1 which is encouraging. Below 80 is recognised as a recession risk so there is some relief in sight. People are now seeing their own personal finances looking better and also improving for 2024”.
Craig Woolford, Senior Retail Analyst MST Marquee advises the majority of spending weakness experienced is now a normalisation and a correction of the overspend during 2020-21 lockdowns. “Consumers want to spend money and people are willing to spend on affordable indulgences”.
“With Retailers driving Black Friday and Cyber Monday we hopefully will stimulate a successful event. Some retailers will go early into Christmas promotions to attract consumers who want to shop early. Consumers think Black Friday offers the best value so it’s important to recognise that in your strategies”.
“Supply Chain is not completely back to where it was pre-Covid however we are seeing more international students back in the country and inventory levels are healthy and clean. There are still a lot of vacancies in staff, but enough to cover the shop floor requirements”.
In terms of consumer psychology, Dr Flavio Souza, Global Director Research and Strategy Afterpay suggests that it’s important to understand your consumer, particularly who they are, for example whether they are Gen Z or Millennials, and to also understand why they make the decisions they do. “Analyse what kind of journeys they adopt, and think about how they want to pay at the end of that journey. In particularly we’ve seen that Gen Z wants to buy on Black Friday and Cyber Monday”.
“Generally speaking, we are also seeing people trying to be more creative to give a meaningful gift. To some extent, people are still willing to spend on brands, however this year they are also looking to save money. Their main motivation when purchasing a gift is to put a smile on someone’s face”.
“Bundling offers is also an area that consumers are responding to in terms of pricing and point of sale.
“What we are seeing is there is more of a concern of shoppers with being ethical and their intent to support local businesses. Are they willing to pay more for it? If they find an item that ticks a lot of motivations, they might use Afterpay to buy something if it’s a little bit more expensive and meets their values”.
The aim really is for Retailers is to offer ethical choices at an affordable price.
Leah Rocheleau, Vice President, Advisors Retail & Commerce at Mastercard notes that Online shopping continues to perform well this year at 27-30% of total retail sales. Groceries have held at 5-10% for most of the year are now coming down to 4%. Apparel has been down most of the year but it will be one of the segments to watch in coming months.
“We are also seeing a difference in how consumers are spending their share of wallet. The mass market are not spending more on groceries, so they are trading down in choices, while more affluent consumers are spending more – so they are absorbing the price increases, and their spending is going up”.
“Also this year travel has been quite positive, people are returning to normal travel but at higher prices. Australia’s inbound tourists now have a strong preference to spend on experiences, not purchasing material goods. Australia topped the destination for Asia Pacific travellers so there is a lot of opportunity there”.
Predictions include more spending on technology like gaming consoles and a trend towards festive feastings. “Consumers are dipping into their savings, and their decision is based on where they are getting the best value”.
Small businesses are seeing a growth since Covid and their current challenge is working out how to stay competitive with larger business. “They will need to use social media to keep their brands front of mind with their customer base and have a few offers ready. Also it’s important to think about how to improve in-store payment experiences rather than having customers queuing up at the checkout”.
Overall the sentiment of qualitative and quantitative insights suggests a cautiously optimistic outlook for Retailers heading into the Christmas season.
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