Christmas comes early as retailers refine strategies
Senior executives say extra money in consumers’ pockets is being spent on purchases of items that may have been deferred during the downturn
On one of the hottest days of the year, the John Lewis “Christmas wish factory” is fully operational.
Visitors are handed high-visibility jackets and hard hats by staff at the chain’s distribution centre in Magna Park, Leicestershire.
Guests make their way through the warehouse style entrance, past pallets and lifting machinery and are then transported to a Christmas emporium, adorned with decorated trees, gifts, home decorations and festive food.
“Christmas in July” — it usually coincides with a heatwave — is a retail tradition with stores putting on lavish shows. The reason for the wilting trees and melting chocolate is to persuade consumer magazines to feature festive products in their Christmas gift guides, which can send sales soaring.
But, as the wish factory demonstrates, Christmas 2015 will not just be about buying products, but also the experience that goes with the purchase.
“People don’t just want to transact any more,” says Andrew Murphy, retail director at John Lewis. “A transaction is fine for a book or a CD. For anything that has any more meaning than that, they want it to come with some experience.”
According to Asda’s income tracker, which measures family spending power, the average UK household was £18 (Dh103.27) better off in June than it was a year before.
But retail executives and analysts are puzzled by the fact that sales in the shops have remained sluggish.
Although retail sales were the strongest for almost 18 months in June, senior executives say extra money in consumers’ pockets is being spent on purchases of items that may have been deferred during the downturn and cars, as well as days and meals out and holidays.
So to tempt consumers to spend on products this Christmas, retailers have to provide the experience to go with it.
In-store theatre — as creating drama around purchasing is known in the trade — is also one of physical retailers’ most potent weapons in the fight against online rivals. Being able to see a product brought to life through a demonstration, or try on a dress in a changing room, can persuade customers to buy at a store, rather than through the click of a mouse, or increasingly, the tap of a smartphone screen.
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John Lewis is expanding the number of so-called Christmas villages — dedicated areas in its stores bringing together festive products — from just one in its Oxford Street flagship last year to between 10 and 15 at stores across the country.
There will also be a range of activities for customers, from learning to make Christmas cards, wreaths and baubles to becoming an expert at gift-wrapping and tree decorating.
According to Murphy, there will be far more product demonstrations, more discovery classes and more effort to educate shoppers about John Lewis’s products than at any other Christmas.
“Our shops are just going to be full of people arresting you with smells, sounds, experience and knowledge” he says. “You will not be able to move for people saying ‘Have a go at this’.”
Sister company Waitrose has introduced a special blend of spices into 30 products, to create “the scent of Christmas” in its stores. The concoction permeates everything from hams, to cakes, Christmas puddings, chocolates, toiletries, candles and even a hot chocolate with a gold shimmer.
There are still plenty of interactive toys, and items related to films such asFrozen and Minions but more traditional items have not disappeared. Linzi Walker, chief toy buyer at Argos, says the online and catalogue retailer has two doll’s houses in its top 10 toy predictions this year.
The DesignaFriend doll comes with her own range of outfits, accessories, pets and even furniture. Each doll, from Argos’s own Chad Valley range, comes in its own designer-style gift box, wrapped in tissue paper to emulate a real-life luxury purchase, and with a collectable charm bracelet.
Where stores can get their product offerings right, retailers expect sales this Christmas to be strong.
“I think that customers will spend more than last year, if the economy and the bit of growth we have is any indication,” says John Walden, chief executive of Home Retail Group, which owns Argos and Homebase.
Fiona Lambert, vice-president for own brand development and design at Asda, which recreated an alpine ski lodge at its show, says the supermarket has tripled its Extra Special range of premium Christmas food this year.
Asda’s George clothing range will also sell its most expensive party dress ever: a heavily embroidered evening dress for £55. Usually, George dresses are between £20 and £25.
One cloud on the horizon however is the prospect of higher interest rates, after the Bank of England warned of a rate rise as early as the turn of the year.
“Inevitably it takes the money out of people’s pockets,” says Walden. “[Rates are] so low at the moment that it’s manageable, but clearly people need to be prepared for it at some stage.”
