Retail sector's Christmas struggles to meet expectations

Monday, 26 December 2016
Retail Ireland, the Ibec group that represents the retail sector, today said that the next few days would be crucial in determining if Christmas 2016 would meet earlier positive expectations. Thomas Burke, director of Retail Ireland said that "the sector is struggling to meet growth targets due to challenging trading conditions". Earlier this year the group had indicated a rise in consumer spending in the region of 3.5 per cent over the Christmas period. Had this been realised, it would have significantly boosted sales, by over €160 million this December. But the latest feedback from retailers suggests that a strong performance in the post Christmas sales period would be needed if the sector was to realise those levels before the end of the year.

Mr Burke stated: "2016 has been the proverbial tale of two halves for Irish retailers. While the first six months of the year saw sustained growth in the sector, the mid point of the year marked a significant slow down in this growth trajectory. Unfortunately it would appear that this trend has continued into the Christmas period. An increase in cross border trade and growing competition from UK based online retailers has drained a lot of the additional consumer disposable income away from domestic retailers."

"Retailers have been discounting prices heavily in recent weeks with pre Christmas sales now seemingly the norm in the sector. In addition sterling weakness in the second half of the year has led to prices on UK sourced products, such as books, falling considerably over recent weeks. Promotional activity will grow further as we enter the traditional post Christmas sales period. Increased disposable income (up 1.5 per cent in the first half of 2015) and a growing number of people in work (up 2.9 per cent on Christmas 2015), means it has never been a better time to be an Irish shopper. Prices fell by 3 per cent in the last 12 months alone as competition between retailers has driven prices back to Christmas 2000 levels. Retailers are hoping this will entice more consumer spend and translate into valuable sales in the coming days."

Particular trends highlighted by various retailers this Christmas include:
    • Intense competition in the grocery sector with consumers benefitting from deep discounting on a variety of ranges as supermarkets battle for footfall
    • Sales in fashion and footwear has been heavily impacted by unseasonably mild weather in recent weeks
    • Significant competition from UK based online retailers has impacted performance of categories such as books, fashion and electronics
    • Two extra shopping days this Christmas week, compared to Christmas 2015, may be crucial in realising pre Christmas targets
    • Extension of Black Friday sales to cover most of the pre Christmas period has shifted dynamics in the sector
    • Pressure on border retailers in early December has eased slightly as Sterling has strengthened during the month
    • A strong performance across furniture and homeware lines during December