Good news for Aussies with discounts in the Christmas forecast

Christmas is coming, but it’s unlikely to be a merry one for retailers thanks to a ‘”perfect storm” of conditions.

Consumers used to have to wait until after Christmas for the sales, but we’re likely to see more items on sale in the lead up to Christmas this year, a new report has found.

Cost of living pressures are expected to result in “consumers taking a more measured approach to spending” this Christmas, with bigger discounting in the forecast, according to the report.

Shoppers will benefit from lots of sales in the lead up to Christmas. Picture: NCA Newswire / Gaye Gerard.

The 2023 Retail Holiday Report, from Deloitte, surveyed executives and senior management from Australia’s leading retailers.

It found that 71 per cent expect higher levels of discounting than last Christmas and 43 per cent of retailers believe it “unlikely that consumers will pay full price these holidays”.

A successful Christmas is crucial to the success of retailers, with 33 per cent labelling it as critical, and another 38 per cent as very important.

Christmas is seen as a key time for retailers. Picture: Deloitte.

“Many retailers are adapting to the market conditions by lowering prices, discounting to clear stock, and focusing on affordable assortments,” the report said.

“There’s an understanding that consumers will be hunting for bargains this holiday period.”

Interest rates, inflation and the cost of living crisis are to blame, said Paul Zahra, CEO of the Australian Retailers Association (ARA).

“As the cost-of-living crisis continues to throttle retail activity – it creates an uncertain outlook heading into Christmas,” Mr Zahra said.

“We expect retail performance will largely depend on two of the predominant factors driving cost-of-living pressures, inflation and interest rate increases.”

“It would be expected that if inflation and interest rates fall, retailers will potentially be in for a jolly Christmas – however, the contrary also applies.”

Mr Zahra said retailers have been hit with a “perfect storm of challenges” this year, including a spending slowdown, rising costs of doing business, government reforms and a retail crime wave.

Australian Retailers Association CEO Paul Zahra said a “perfect storm” of factors are affecting retailers. Picture: Britta Campion / The Australian.

It seems the discounting has already begun with the report finding that retailers are already dropping prices to clear stock with one third discounting “significantly more” than a year ago.

The majority of retailers predicted discounting would hit their bottom lines, with 52 per cent expecting a fall in margins compared to last Christmas.

Nevertheless, total sales are expected to increase with 57 per cent of retailers anticipating some level of sales growth compared to Christmas 2022.

According to ARA figures, retail sales last Christmas were up 7.5 per cent on 2021, with Aussies spending a combined total of $34.5 billion at the shops last December.

But, looking ahead, it seems retailers think that 2024 will continue to be difficult with none expecting double digit growth in retail sales in 2024.

Originally published as Good news for Aussies with discounts in the Christmas forecast