2014 Christmas Sales: A Snapshot of the Major Markets

The performance of retail sales during the Christmas season is a bellwether for consumer sentiment as well as consumer buying strength and preferences, offering a useful gauge to the state of the retail business for the forthcoming year. The 2014 Christmas sales situation in Hong Kong’s major markets offers extra connotation, as much attention appears to be focused on the season’s sales to assess the degree to which the moderate and uneven global economic recovery will prop up consumer confidence and spending. Against this background, HKTDC’s worldwide office network has provided first-hand information to help depict the year-end sales situation in Hong Kong’s major markets.

US – decent growth amid improving sentiment

While sales results for the entire holiday season will not be available until retailers announce their December sales figures in January, preliminary indications reveal that Christmas sales in the US were encouraging, despite the lacklustre sales performance during the post-Thanksgiving Black Friday weekend and on Cyber Monday. For some Christmas shoppers, as retailers started offering in-store and online promotions much earlier, there was no need to wait until Black Friday for attractive deals. For others, procrastination has become the norm, as they have learnt from experience that there would be even deeper discounts towards the end of the season. On the whole, US retailers, helped by largely conducive weather conditions and better economic fundamentals, were likely to achieve a decent sales increase of some 4% over 2013.

If anything, consumer sentiment, backed by solid employment gains, steady wage rises, sturdy asset prices and healthier household balance sheets, has continued to improve, and falling energy prices were an added boost. Amid years of economic uncertainty, however, there was some uneasiness among holiday shoppers when making purchases. To keep their budgets in check, Christmas shoppers were not in high mood to make lavish spending. Most shoppers, without losing their taste for bargains, stuck to well-priced and practical gifts, taking time to plan and organise their purchases. Even more wealthy shoppers were focused and tactical, opting for less pricey articles rather than flashy items. In most cases, shoppers still used cash or debit cards to ensure spending within budget, along with a preference for gift cards in view of their practicality. The use of mobile devices and social networks to look for gift ideas and lower-priced items has also become a commonplace.

Well aware of the stubbornly thrifty consumer mindset, US retailers, apart from extending the sales promotion period and store opening hours, have offered a flurry of deep discounts and door-buster specials to woo deal-hungry shoppers. Zeroing in on the popularity of online purchases in general and mobile shopping in particular, e-tailers as well as most store-based retailers with websites and mobile apps, performed especially well during this festive season. However, as cautiousness has remained the buzzword for many holiday shoppers, mass merchandisers and discounters again captured a big chunk of year-end business. Yet department stores and up-scale stores showed good gains too, given the fairly robust sales of luxury items.

In terms of products, consumer electronics were among the biggest draws, with smartphones, tablets and wearable technology items topping the list of stocking stuffers. Toys were another standout. Other than video games and basic playthings like cars and dolls, a number of long-favoured items like Barbie, Lego and Teenage Mutant Ninja Turtles fared quite well, as did some new favourites, notably Disney Frozen merchandise. For clothing and accessories, consumers’ focus on practicality and value whetted an appetite for basic items that offer comfort and function, evidenced by the good showing of winter clothes and footwear alongside the cold weather, whereas discounted high-end apparel items were well received. Likewise for competitively priced jewellery and upscale timepieces, sales were satisfactory this season. Regarding home-related merchandise, demand has received increased support from the improving property market.

EU – UK and Germany leading the pack

Compared with the US, it has generally been a tough holiday season in Europe, although Christmas sales results have varied from country to country, with the UK and Germany again carrying the day. France and Italy, for their part, were affected by consumption abstinence that tended to overshadow the good tidings of the festive season. On the whole, holiday shoppers, in the face of high joblessness in most member states and continued austerity measures to address EU debts, were still conservative, sticking to budget and hunting for basic and practical products. In more and more cases, the inclination was to use mobile devices and social networks to find the best prices and gather sales information. European shoppers, shying away from credit cards, favoured cash and debit card payment for their purchases, and gift vouchers were also popular.

In light of unabated consumer conservatism, most retailers continued to resort to discounts and promotions to lure sales. But the degree of reliance on such sales tactics varied among markets. For example, in Germany and the UK, where consumer sentiment was more positive, price cuts and promotional activities seemed to be less rampant. Outlet-wise, as consumers were still focused on prices, value retailers continued to outsmart department stores and upscale stores, where sales were driven by the more affluent EU shoppers and, to a lesser extent than last year, an inflow of overseas buyers, especially from China. Riding on the success of online retail sales, e-tailers were another frontrunner during this festive season. In response to the prevalence of online sales, a growing number of store-based retailers also involved themselves in e-tailing to facilitate holiday sales.

Germany

In Germany, the retail climate was largely constructive, although its exports and investment have been hampered by the fallout from the Russian crisis. Overall year-end sales, bolstered by a stable labour market, increasing wages, subdued inflation and low interest rates, are estimated to have risen by more than 1%. Product-wise, consumer electronics were among the favoured gifts, with notebooks making a comeback to outperform mobile phones. For toys, while traditional items, such as dolls, wooden toys, construction sets and board games, continued to fare well, selected non-traditional playthings, such as smart toys and educational toys, were well received. For garments and footwear, the appetite for winter gear was spoiled by the unseasonably mild weather in the early part of the season. Meanwhile, jewellery and timepieces were sought after for the sake of long-term investment. Household appliances, in contrast, were less sellable.

France and Italy

Relative to Germany, economic conditions in France and Italy have been less favourable. With renewed concerns about the economic outlook in both countries, the year-end shopping atmosphere has deteriorated a tad. As consumer confidence was fragile, extensive discounts and promotions were required to stimulate sales. Even so, holiday sales in both countries are estimated to have declined somewhat from the 2013 levels. While Christmas shoppers in both markets, given their cautiousness, opted for practical and basic gift items, trendy items, notably smartphones and tablets, were still in demand. Electronic gadgets aside, low-cost budget notebooks also sold well. Regarding toys, sales performance of items tied in with animation movies was more eye-catching. Meanwhile, clothing and footwear sales were hurt by the generally mild weather, whereas timepieces and jewellery occupied a lower position on the shopping list too.

UK

Christmas sales in the UK are expected to have risen by almost 3% against the backdrop of widespread discounts and promotions. To be sure, the year-end shopping spirit was lifted by the continued recovery of the British economy featured by stronger employment and property prices, notwithstanding a tempered pace of growth vis-a-vis last year. As elsewhere, consumer electronics were the standout, especially for smartphones, tablets and notebooks. The robust housing market further shored up the demand for household electrical appliances as well as furniture and houseware, while mid-priced watches and jewellery were other hot picks in line with the rekindled interest in big-ticket items. For toys, electronic items and playthings for the 0-5 years range were more popular selections. For their part, clothing and footwear retailers still managed to record better sales, despite the largely mild weather which served to suppress the demand for heavy clothes and winter boots.

Japan – still positive spending vibes

In spite of the 3 percentage point rise in sales tax since April, Japanese consumers have slightly loosened their purse strings, thanks to wage increases, a rebound of the stock market, as well as extensive discounts and promotions. As it turned out, retail sales are expected to have expanded by some 2% during the year-end season. While higher-income customers, notably those made windfall from the stock market, exhibited a penchant for luxury items, most shoppers stayed timid, and discount stores and e-tailers were again favoured. Like the US and the EU, consumer electronics, spearheaded by smartphones plus 4K TVs, were a popular buy. In tandem with a firming demand for luxury products, sales of watches and jewellery were up, whereas a chilly winter has reinforced the demand for clothing and footwear. In contrast, sales of toys were sluggish, although items relating to Youkai Watch and Disney Frozen were big hits.

China – a favourable consumption atmosphere

In China, massive discounts and promotions, facilitated by the buoyant stock market, have cheered up the year-end consumption spirit. After the 11.5% rise in October, retail sales grew slightly faster by 11.7% in November, suggesting an upward trend of consumption amid a slow economy. In addition to Yuletide shopping, this brisk performance has underlined the rise of the Double 11 and Double 12 Days -- two popular online shopping festivals that contributed markedly to the year-end spending binge. With hearty retail and online sales of most products, consumer electronics, led by mobile phones, tended to be the star performer. Yet the demand for luxury goods was dampened by the continued frugality campaign. Sales of houseware and household appliances were also impaired by the sluggish housing market, although the air pollution problem across the mainland has stimulated an appetite for air purifiers and humidifiers. Sales of clothing and toys, on the other hand, have remained steady.

Other emerging markets – generally good showings in Latin America and Central and Eastern Europe

For Latin America, consumer sentiment was overcast by slackening commodity prices and exchange market fluctuations. But while consumers were cautious in festive shopping, better Christmas sales over last year were mostly recorded for the major markets in the region amid extensive discounts and promotions. Particularly in Mexico, where the economy has moved in parallel with the US, year-end sales were solid, evidenced by the good scores achieved in Good Weekend, the equivalent of Black Friday in the US. In Chile, with strong economic fundamentals, Christmas shoppers have not slowed down their spending at the same pace as the moderation of the Chilean economy. In Brazil too, festive sales were up moderately in the face of a cooling job market and higher interest rates. In terms of products, consumer electronics, electrical appliances, garments and toys were among the more popular gifts in these markets.

As for Central and Eastern Europe, a reviving EU economy, though modest and uneven, seemed to be a boon to festive spending, despite the negative impact of the Russian crisis. Indeed, sales increases of varying extents were recorded for Hungary, Poland and the Czech Republic. Like their counterparts in Western Europe, however, shoppers remained concerned about their purchasing power, and good deals were required to lure purchases. In the main, shoppers were keen on consumer electronics, toys and garments. Outside the EU, Russia, in spite of tumbling oil prices and a faltering economy, yielded even more striking sales results. With consumers feeling the pinch from the sinking rouble and mounting inflation, a sequel was the rush to snap up goods before prices soared. While not for purpose of celebrating the festive season, this spending spree has nonetheless contributed to the exceptional performance of year-end sales in Russia.

Promise of Xmas sales results – a more favourable outlook for 2015

Year-end sales performance has gradually become a valuable pointer to retail business in the year ahead, not only in countries that celebrate Christmas, but also some markets where Christmas is not traditionally a festive season, the Chinese mainland in particular. On the whole, Christmas sales performance for 2014, in view of the rejuvenating albeit still shaky world economic environment, was somewhat better than that attained last year, although developments differed quite significantly in both traditional and emerging markets. In traditional markets, the US was the forerunner, trailed by the UK. Moderate sales increases were also posted by Germany and Japan, but ho-hum outturns were witnessed in France and Italy. In the emerging world, year-end sales generally tended to be more temperate than last season, with the major exception of Russia, where consumer demand was lifted by the plunging rouble rather than a sound economy, however.

Despite some setback in France and Italy, the continued recovery of traditional markets is definitely good news for Hong Kong exporters, who should intensify their sales efforts to take hold of any renewed business opportunities. Yet they should be aware that as consumers are becoming more willing to spend, a cautious attitude will prevail in the foreseeable future. Value-for-money will therefore remain the most important determinant for most shoppers, with a fast expanding proportion of them using the Internet to find product information and compare prices. As a consequence, most importers and retailers will continue to be conservative, who are still expected to play safe in terms of order size, lead time and pricing, while further engaging in e-tailing to buttress sales and diversifying their sourcing and manufacturing from the Chinese mainland to other production bases throughout the Asian region to lower costs.

While sales to traditional markets will be crucial because of their sustained recovery, Hong Kong exporters should further hunt for new business opportunities in emerging markets for business expansion. Manifested by the holiday sales results, there are a number of welcome outlets in the fledgling world, although economic prospects are tainted by slackening commodity prices in Latin America and the Russian crisis in Central and Eastern Europe. Of more importance is the mainland, where stimulus measures are expected to be introduced to sustain the momentum of the economy. Over the long haul, government endeavours to promote consumption so as to achieve a more balanced growth between domestic and external demand, as well as between overall consumption and investment-led growth, will unfold new dimensions for Hong Kong companies accustomed to exporting to overseas markets.