- Experts have told CNBC that there are at least three reasons for British retailers to be optimistic.
- However, shopping baskets may look a little different this year as people have taken on hew habits.
- It's not just what consumers buy, but also how they shop that's likely to be different this Christmas.
LONDON — The coronavirus crisis has caused serious challenges for many retailers this year with the holiday shopping season seen as their last chance to pull in much-needed sales.
In the U.K, like in many nations, December usually represents the best month for sales of the entire year. But amid one of the worst economic crises in history, there are concerns on how the sector will fare.
Nonetheless, experts have told CNBC that there are at least three reasons for British retailers to be optimistic.
Pent-up demand
"Clearly many people will be struggling financially as a result of the pandemic, but cashflows will have improved considerably for many other households across the U.K. given they have been forced to spend less on travel, commuting and going out, and many will have used this opportunity to build up their savings and pay down their debts," Amisha Chohan, equity research analyst at the investment management firm Quilter Cheviot, said.
The household savings ratio in Britain, which is the percentage of cash people save rather than spend, increased from 9.6% in the first quarter to 29.1% in the second quarter, according to the Office for National Statistics. This represented a record since the data began in 1987.
"There is real optimism that this forced saving will ensure there is pent-up demand to be released in the coming weeks and months ahead," Chohan said.
Data from the U.K.'s statistics office has shown consumers spent about £82 billion in November and December of 2019. But due to pent-up demand, the British Retail Consortium, a trade association, has said that sales will "outdo" those seen last year.
Money Report
New habits
Shopping baskets may look a little different this year.
"People have more time, so they took on new habits and that's going to drive some sales as well," Jat Sahi, retail consulting lead at Fujitsu, told CNBC last month.
Gym equipment, jigsaw puzzles and board games, for instance, were among the most popular items in the U.K. in the runup to the second lockdown in November, data from eBay showed.
"We are using our houses differently, making them more comfortable," Sahi noted, suggesting that homeware is also likely to be a top choice for consumers, who are expecting to remain working from home for at least part of the foreseeable future.
In previous holiday periods, music and movies, as well as books and computers were the top three items purchased for gift-giving, according to the Bank of England. New clothing items also tended to be a top choice for many consumers at this time of year.
"Clothing faces the biggest problems because people are not going to Christmas parties," Jonathan Pritchard, retail analyst at Peel Hunt, told CNBC over the phone.
It's not just what consumers buy, but also how they shop that's likely to be different this Christmas.
Retailers have noted a surge in online sales in the wake of the pandemic as consumers were forced to stay indoors. This trend is expected to continue over Christmas with social restrictions still in place in many U.K. cities.
According to eMarketer, a data company, U.K. consumers are set to spend £141.33 billion in online shopping for the whole 2020 — a jump of 34.7% from the previous year.
'We deserve it'
"It's an emotional thing. We have been in lockdown for so long, we deserve it," Sahi also told CNBC about the rationale behind some of the purchases this season.
People have been prevented from doing activities as a result of the pandemic, but shopping is still one of the very few options they have.
Chohan also noted people's willingness to enter the Christmas spirit earlier this year.
"Reasons to be cheerful have been few and far between this year, and this deficit of joy has encouraged many to get in the festive spirit early by putting up their decorations and getting started with the Christmas shopping much earlier than they normally would," she said.
