Boxing Day sales could be last hurrah before tough economy in 2024

A Boxing Day retail splurge is still expected, but it could be the last hurrah before the realities of a tough economy starts to dent spending.

Australian shoppers are expected to rush the stores on Boxing Day and the last few days before the new year to take advantage of the deep discounts and promotions dangled before them by retailers.

But it could be the last hurrah before the realities of a tough economy in 2024 starts to dent spending.

The National Retail Association expects retailers to finish the year with a $3bn Boxing Day sales spending spree and around $9bn for the entire Boxing Day sales event up to December 31.

Although this represents a fairly flat rise on spending from the year before, and given inflation is running at about 5 per cent, it means in real terms households are spending less suggesting shoppers spent large chunks of their disposable income through the Black Friday sales of November and thus diluting Christmas and Boxing Day as major shopping events.

Unseasonably cold and rainy weather is making predictions harder too.

Rain and storms forecast for much of the week could prove a dampener on Boxing Day spending on areas such as dining out.
But inclement weather could however lift foot traffic to the large shopping centres and malls as people leave their beach towels, chairs and suntan lotion in the cupboard and an undercover retail precinct proves a better alternative to the beach.

The NRA has also noted huge discounts, some of up to 60 per cent, with heavy promotions spread across categories such as alcohol, consumer electronics, cosmetics and bedding to make it a “buyer’s Christmas”.

Ian Bailey, the managing director of Kmart Group, which operates Kmart and Target that are the largest discount department stores in Australia, said Black Friday promotions had somewhat diluted traditional Christmas sales, while households from all income levels were showing the strains of rising interest rates and inflation through 2023.

Kmart Group managing director Ian Bailey says Black Friday has had an impact. Picture: Supplied

Mr Bailey said he expected many households to focus on “maintaining their lifestyles” into 2024 which would mean a stronger focus on hunting for bargains and stretching budgets to their maximum.

“Throughout this period, in which we’ve now been in for a while, of inflation and higher interest rates and people just generally having a little bit less money to spend than they did previously - in some cases quite a lot less money as their mortgages have increased - we know that everyone wants to try and maintain their lifestyle,” he said.

“And the way to do that is to be really savvy, really smart, around where you purchase and you do all the things you want to do with your life.

“And we are seeing that play out, so we’re seeing people from all income levels increase their shopping and spend with us. That would be a clear sign for us that we are doing a good job … but also looking for value and I think that is going to intensify as we go into next year.

“I don’t think there is going to be a cliff,” Mr Bailey added, “but equally I don’t think any of us are anticipating we are going to be in for a bonanza year next year with the economy kicking on and consumer spend suddenly expanding rapidly.”

NRA director Rob Godwin said multiple interest rate increases and general economic uncertainty had delivered a flat 2023 pre-Christmas sales period, and retailers were now preparing deeper-than-normal discounts to spark a final spending rush for the year.

Mr Godwin said the Boxing Day sales represented one last opportunity for savvy shoppers to grab a festive season bargain, but they also had an important role in sustaining business success and employment.

Discounts to drive shoppers in store.

Cafes might suffer in wet weather.

“We expect retailers to offer higher discounts than we are used to seeing at this time, due to a number of factors including the difficult trading conditions in 2023 and the shift in consumer behaviour caused by the Black Friday and Cyber Monday sales events,” he said.

“That’s good news for buyers, but it’s also important for retailers as it provides the cashflow they need to sustain their business operations and employment levels through the quieter parts of the new year.

“And it is really a make or break time for retailers due to the softening of consumer demand due to obviously cost of living, inflation.”

Mr Godwin said the poor weather conditions might not be good news for cafes, restaurants and hospitality venues, but would see greater crowds flock to shopping centres and consumers jumping online for Boxing Day sales.

“I think with the inclement weather on the east coast we should see an increase in foot traffic into the shopping centres, but also online stores as well. When it comes to major online, and bricks and mortar retailers, bad weather is good for foot traffic because you’re pulling people away from the beaches, barbecues and outdoor family activities.

“So whilst it’s not great for hospitality, certainly good for bricks and mortar and online retail.”

Australian Retailers Association chief executive Paul Zahra is tipping Australians to spend $23.9bn in this year’s sales between Boxing Day to January 15.
That’s around $400m more than in 2022 as shoppers turn their attention to bargain hunting to save money.

Research by the ARA, in conjunction with Roy Morgan, forecasts post-Christmas period spending (December 26-January 15) will increase 1.6 per cent year-on-year.

“Despite a strong Black Friday weekend trade, by all accounts, it’s been a subdued Christmas for discretionary retailers. What doesn’t bode well for retailers is great for consumers as retailers will need to discount heavily to clear inventory,” Mr Zahra said.

The ARA is predicting that department stores, such as Myer and David Jones, will lead the growth in Boxing Day sales, with sales to lift by around 4.8 per cent for that category, with clothing up 3.4 per cent and food up 2.7 per cent.

“Whilst sales may increase over the holiday period, margins will be a concern for retailers.

Department stores traditionally star in the post-Christmas sales as they are one stop shop- customers can shop across a range of brands and visit the change rooms once,” Mr Zahra said.