Households to increase their spend to €2,700 for festive season
An industry body has thrown down the gauntlet to retailers to be ready for Christmas, with households set to spend almost €2,700 during the period.
Retail Ireland, the Ibec group that represents the sector, said its Christmas Retail Monitor 2018 was predicting households will spend an average of €2,690 in shops this December. That figure is about €866 more than any other month of this year and roughly 3% more than Christmas 2017.
The report said that with growing disposable income, rising wage levels and continually falling prices, the spending power of consumers is greater now than at any stage in the last decade.
For this reason, retailers have good cause for such optimism, but they remain acutely aware of the delicate nature of consumer confidence which has experienced peaks and troughs during the last year, it found,
A slight dip in sales in October should not give raise to unnecessary concern for traders, but it does act as a timely reminder of the continuing fragility of the sector, said the monitor.
Retail Ireland director Thomas Burke said: “There is no doubt the spending power is there, the challenge now for retailers is to best position themselves over this key trading period to convince consumers to part with that hard-earned cash in their stores and through their various other sales channels.”
The body said it was predicting an increase in sales of over €150m, with sales over the Christmas season expected to top €4.65bn, up from €4.5bn in 2017.
However, with a greater number of Irish shoppers now choosing to shop on foreign websites, Retail Ireland said, the challenge for retailers will be to ensure that this buoyancy is felt locally and that Irish-based retailers benefit from this anticipated additional spending.
After what has been a tumultuous year of highs and low for Irish retailers, we have now reached a crucial juncture in terms of determining the end of year position for the sector.
“Rising disposable incomes, record numbers at work, and falling prices have all combined to give consumers greater spending power than ever before and will raise consumer spirits and enable greater spending power over the busy Christmas period,” Mr Burke said.
“While consumer sentiment has dipped somewhat in recent weeks, most likely owing to consumer fears around the impact of events such as Brexit, retailers are hoping that for the next three weeks at least these challenges can be set aside, and consumers will embrace the festival of shopping that the Christmas season brings.”
The value of consumer spending in the economy is on course to expand 5% in 2018, with volumes likely to increase 3.8%, according to the monitor.
Unlike the previous peak in consumer spending between 2005 and 2008, this growth is not credit-driven, it found. It said that during that period households were borrowing about €2bn per month to fund spending.
The challenge for retailers is to capture a larger portion of that growing disposable income, which is going to service housing costs and to the entertainment sectors, said Retail Ireland.
Retailers feel sensitive to consumer demand for low prices, the report found.
Further depreciation in sterling which reduced import prices, falling oil prices and intense competition in the retail sector has kept inflation levels in check during 2018.
“Key drivers of falling retail prices include electrical products, footwear and food. While the relative levels of discounting have eased in recent months, retailers remain sensitive to consumer demand for low prices,” the report said.
