Don’t feel guilty about a commercial Christmas – it provides the economy with a vital boost

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The “commercialisation” of Christmas has long been a feature of the season. Although there have been significant changes in seasonal shopping habits over the past decade (such as online

stores and the introduction to the UK of “Black Friday) the practice of buying gifts, bringing a commercial element to festivities, is a well established tradition.

The Great Exhibition of 1851 in London was a showcase of consumer goods from around the world, and a catalyst for a new style of consumerism. In particular, this was the golden age of the

"department store”, which coincided with the development of other Victorian habits that encouraged the commercialisation of Christmas.

Christmas crackers, for example, were invented by a Victorian confectioner in 1848, as a new way to sell sweets. And in the 1880s, the practice of sending Christmas cards had become so

popular that 11.5 million cards were produced every year. Gift giving, which had traditionally been a way of celebrating the New Year, also moved to Christmas.

Department stores including Harrods and Selfridges embraced this idea, with lavish window displays and opportunities to visit Santa in a grotto. (It was also Harry Selfridge who reputedly

came up with the idea of counting down the number of shopping days until Christmas.)

So shopping for gifts at Christmas time is clearly a well established tradition. And it has also long been something that provides a real boost to both the retail sector and the wider

economy.

In the UK, the retail sector represents 5% of the UK’s economy, contributing £98.4 billion GVA (gross value added), as well as providing almost 3 million jobs. Many of those in retail often

describe the three trading months from October to the end of December as the “golden quarter”, when the industry hopes to make the most profit. (Although this does not apply to all

retailers, due to the high level of discounting, particularly in fashion.)

According to the ONS Retail Sales Index, November and December account for more than a fifth of the year’s retail sales, with food sales representing around 44% of money spent in December

2018. According to the Bank of England, shoppers spend an estimated 16% more on food, and 39% more on alcohol over the Christmas period.

The British Retail Consortium expects total spending of about £82 billion in November and December 2019. This would be a modest 2% increase from the same two months in 2018 when the ONS

reported sales of over £80 billion.

But not all shopping traditions work in retail’s favour. “Christmas creep” describes the increasing trend of major retailers moving the start of their advertising and promotional activities

ever earlier to exploit the commercialised status of Christmas – in some cases as early as the first week of November.

Much of this is linked to the Black Friday concept started in the US. The fourth Friday of November has become a focal point of significant discounts both online and in-store. In recent

years this has grown to become one of the major discounting periods of the UK retail calendar.

But the increase in discounted sales over Black Friday weekend has effectively just pulled forward sales from the following weeks and the immediate run up to Christmas. Back in 2013, retail

spending grew steadily throughout November until mid-December and then fell away. But in the past two festive periods the Black Friday effect has redistributed, and brought forward,

significant levels of Christmas purchasing into November.

For Christmas 2018, research showed that pre-Christmas discounting was averaging 43.6% across all retail, rising to 48% by Christmas Eve – a new record. Much of this was in the fashion

sector, caused partly by the mild winter weather, business uncertainty and oversupply of stock.

However, a survey in January 2019 released by the British Retail Consortium showed that retailers had failed to increase the overall Christmas spend for the first time since the depths of

the global financial crisis over a decade ago.

Figures reflected the heavy discounting by retailers, both in the run-up to Christmas and Boxing Day sales. The real impact of this on profit margins, as well as the additional costs

involved in managing Christmas gift returns, became clear when major retailers subsequently announced their sales and profit results.

The end of 2018 saw bad news for fashion retailer ASOS, as it reported weak profits and a share price drop of 40% due to the heavy discounting of its clothes throughout November and

December. It then posted an 87% fall in pre-tax profit year on year to £4 million in the six months to the end of February 2019.

The expectation that we can return unwanted items bought online comes at considerable expense to retailers. In fact, research shows that the average returned purchase in the UK passes

through seven pairs of retail hands before it’s put out for sale again.

As far as Christmas 2019 is concerned, recent research indicates that the struggling UK retail sector may not get the Christmas sales boost it really needs, as once again many customers did

the majority of their festive shopping during November’s Black Friday sales. So if you are shopping for last minute bargains, or splashing out on Boxing Day or New Year sales, don’t feel too

guilty. Your seasonal spending spree provides vital support to the retail sector and the wider economy.