2015 Xmas Sales: A Round-up of the Major Markets
29 December 2015
Retail sales performance across the Christmas period is a key barometer of consumer sentiment, buying strength and preferences. It also offers a useful gauge as to the likely state of the retail business for the forthcoming year. The level of 2015 Christmas sales in Hong Kong’s major markets has an extra significance, given the considerable attention being paid to the season’s sales as a means of assessing the stability of the global economy, consumer confidence and inclination to spend. In this context, HKTDC’s worldwide office network has provided first-hand information in order to help determine the year-end sales situation in the key over overseas markets.
US – Steady Growth amid Sustained Economic Recovery
Although sales results for the whole festive season will not be available until retailers formally announce their December business turnover in January 2016, the early indications suggest that holiday sales in the US were steady. This is despite evidence of a lacklustre sales performance during the post-Thanksgiving Black Friday weekend, a time when holiday shoppers traditionally spend freely. The Black Friday weekend, though, has increasingly ceased to be a valuable pointer to overall Christmas sales as the holiday season now begins much earlier. This extension has also made the length of the period between Thanksgiving and Christmas (which lasts 28 days this year, compared to 27 in 2014), largely irrelevant to year-end retail results. With festive shopping more evenly spread out, US retailers are expected to have recorded a stable sales rise of around 3.5% this season compared to 2014.
In spite of adverse weather conditions, consumer sentiment has remained favourable, a reflection of low unemployment, steady payroll increases, an improving housing market and better household balance sheets, with subdued oil prices proving to be another contributory factor. Christmas shoppers, however, were still not buoyed enough to make lavish purchases, a consequence of years of economic uncertainty. Most shoppers, albeit tired of penny pinching, stuck to well-priced and practical gifts, taking time to plan and organise their purchases. Even the more wealthy shoppers were focused and tactical, favouring less pricey articles, rather than the more ostentatious purchases. In most cases, holiday shoppers still opted to pay via cash or debit cards, ensuring they spent within budget. There was also a notably affinity with gift cards in view of their practicality. The use of mobile devices and social networks to search for gift ideas and to make online price comparisons has also continued to be the norm.
In response to this continued consumer caution, many US retailers - especially clothing outlets - again resorted to a comprehensive range of discounts and promotions to attract price-driven shoppers, although some have tried to curtail such incentives. Taking advantage of the popularity of online purchases (particularly in terms of mobile shopping), many e-tailers, including most brick-and-mortar retailers with websites and mobile apps, performed particularly well during the festive season. Nevertheless, as prudence has remained the creed for many holiday shoppers, mass merchandisers and discounters again captured a large chunk of year-end business. Department stores and high-end stores also demonstrated some gains, largely owing to stronger sales of discretionary items.
Product-wise, consumer electronic items were among the biggest draws this year, with TVs, tablets, smartphones and wearable items topping the list of stocking fillers. The appetite for home appliances, meanwhile, has been whetted by the improving property market. Toys, for their part, were an even bigger standout. Other than video games and a number of established favourites, such as Barbie and Lego, demand has also been particularly strong for items related to current blockbuster movies (notably Star Wars), while demand for merchandise associated with Disney’s Frozen franchise also remained high. By contrast, sales of clothing suffered on account of the unseasonably warm weather. In terms of competitively-priced jewellery and upscale timepieces, though, sales were seen as satisfactory this season.
EU – Germany and UK to Remain the Bright Spots
Despite heightened security concerns, festive spending in Europe was generally in better shape in 2015 than in the previous year. Sales results, however, varied from country to country, with Germany and the UK again taking the lead. Believing the EU economy to be on course for a gradual recovery, consumers proved more willing to spend. While consumer confidence has strengthened somewhat, high joblessness in many member states and the continuation of EU debt-busting austerity measures saw many shoppers remain largely conservative, sticking to budgets and hunting for basic and practical products. Ever more frequently, the practice was to use mobile devices and social networks to find the best prices and to gather sales information. European shoppers, while mostly shying away from loans and credits, favoured cash and debit card payment for their purchases, while gift vouchers were also popular.
In response to enduring consumer conservatism, most retailers continued to rely on discounts and promotions in order to bolster sales, with the dependence on these sales tactics diverging across product sectors. Price cuts and promotions, for instance, appeared to be more generous in the hard-to-move apparel market, a trend spurred by the unhelpful weather. In terms of outlets, as consumers remained focused on prices, value retailers continued to outperform department stores and upscale stores. At the higher end of the market, 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. Capitalising on the success of online retail sales, e-tailers again outperformed many other channels during the festive season. In view of the pervasiveness of online sales, a rising number of store-based retailers also turned to e-tailing to boost their holiday sales.
Notwithstanding the refugee problems, the consumption sentiment in Germany was largely favourable, due primarily to its decent labour market, increasing wages, subdued inflation and low interest rates. In all, holiday sales are estimated to have expanded by about 2% over 2014. In terms of products, electronic gadgets - notably tablets, smartphones and other mobile devices - remained high on the shopping list, while higher-end electrical kitchen appliances were also in considerable demand. In terms of toys, traditional items, such as construction sets, continued to fare well. A number of non-traditional play items, notably smart toys and educational toys, were also well received, while movie franchise tie-ins, notably Star War merchandise, were a big hit. By contrast, sales of clothing were hampered by the unseasonably mild winter. In the case of jewellery and timepieces, sales were hurt by a lack of appetite for luxury goods.
The UK was another frontrunner in terms of 2015 Christmas sales, with overall takings expected to have risen by some 2% over the preceding year. The year-end shopping spirit was seemingly lifted by the sustained recovery of the British economy, as evidenced by the steady growth in employment, continued wage increases and a solid housing market. As was common elsewhere, sales of consumer electronics, in general, and smartphones and other mobile devices in particular, were most notable. The buoyant housing market further buttressed the demand for household electrical appliances, while mid-priced jewellery and watches were other hot picks, in tandem with a rekindled interest in big-ticket buys. Demand for toys, in the meantime, was in a lower league, but by no means falling far behind. This was largely thanks to the prevalence of video games, smart toys, as well as Star Wars-related playthings. For their part, clothing retailers only managed to record anaemic sales amid the warm weather, a factor that served to suppress the demand for winter clothes.
France and Italy
Bucking the downward trend of the last season, Christmas sales have improved in both France and Italy. In France, where domestic demand has been stronger, year-end sales were satisfactory, with the recent terrorist attacks having only a limited impact on the shopping atmosphere. Even in Italy, where economic conditions have been less robust, the emergence from recession has delivered a stimulus to festive spending, leading to a marginal sales increase compared to 2014. Overall, consumer confidence was still fragile, and widespread discounts and promotions seemed indispensable. Given the caution shown in both markets, Christmas shoppers opted for practical and basic gift items, while the more currently stylish items, not least smartphones and tablets, were among the favoured gifts. Household electrical appliances also sold well, as did toys, especially Star Wars-related items. On the other hand, demand for clothing was dragged down by the gentle weather. Jewellery and timepieces also occupied a lower position on the Christmas wish list.
Japan – Year-end Cheer Spurred by Mainland Tourists
In Japan, retail sales are expected to show growth of more than 5% across the year-end season. This, though, has been partly sparked by an influx of Chinese tourists, who snapped up a wide array of products, including low-cost consumer items as well as luxury goods. This saw them not only patronise daily chain stores, but also department stores and up-scale stores. In light of the overall lacklustre state of the Japanese economy, however, local shoppers stayed timid, opting for basics as year-end gifts. Price cuts and promotions were again in evidence as a means of attracting shoppers, many of whom again favoured discount stores and e-tailers. On balance, most products, though, fared reasonably well. As with the US and the EU, consumer electronics, led by smartphones, tablets and TVs, were the most popular buys, while healthcare electronic devices and rice cookers were the other big hits. In terms of toys, playthings associated with Yo-kai Watch and Star Wars were much sought after. As for jewellery and watches, the strong sales here were mainly down to tourist demand. As in other markets, clothing sales remained low as a result of the high temperatures in many parts of the country.
China – An Improving Consumption Atmosphere
In China, the retail climate has become more positive, suggesting that the country’s slew of pro-consumption measures have started to take effect. Following an 11% rise in October, retail sales expanded by 11.2% in November 2015, the fastest pace this year, making the overall growth 10.6% for the first 11 months. In addition to Yuletide shopping, this brisk performance underlined the rising popularity of Singles’ Day, an event that has contributed markedly to year-end spending figures. With robust retail and online sales of most products on the back of intense discounts and promotions, consumer electronics - dominated by tablets and mobile phones - were among the bestsellers. Meanwhile, sales of household appliances were boosted by the likely bottoming out of the housing market, while the air pollution problem across the mainland led to continued demand for air purifiers and humidifiers. Sales of trendy fashion products and toys were also steady. The demand for luxury goods, though, was dented as a consequence of the continued government-led frugality campaign.
Other Emerging Markets – Mixed Fortunes in Both Latin America and Emerging Europe
In Latin America, consumer sentiment was again undermined by weak commodity prices and exchange market fluctuations. With consumers cautious when it came to festive shopping, Christmas sales results were mixed across the region, with only extensive discounts and promotions succeeding in luring in consumers. On one side of the spectrum was Mexico, where the economy has moved in parallel with the US, with the year-end sales performance consequently solid. By contrast, year-end sales in Chile were stagnant, with Christmas shoppers slowing down their spending in line with the moderation of the Chilean economy. Less positively still, Brazil, as a consequence of its economic recession, witnessed a decline in Christmas sales. In terms of products, consumer electronics and garments were well received in Mexico and Chile. Houseware, for its part, though, was more sellable in Brazil.
With regard to emerging Europe, a recovering EU economy, albeit slow and patchy, proved to be a growth driver for festive spending, despite the downturn of the Russian economy. If anything, sales increases of varying degrees were apparent in Hungary, Poland and the Czech Republic. As with their counterparts in Western Europe, though, Christmas shoppers remained concerned about their consumption power. Good deals were therefore a prerequisite for encouraging sales, with toys, consumer electronics and electrical appliances among the more popular gifts. In contrast, Russia, due mainly to slackening crude prices and its dire economic conditions, demonstrated poor Christmas sales results. In spite of widespread discounts and promotions, consumers were in no mood to spend, although electronic gadgets, household goods and home decoration items suffered less than most other sectors.
Implications of the Xmas Sales Results – A More Stable but Still Unspectacular 2016
In many of Hong Kong’s major markets, the year-end sales performance - which may constitute as much as 30% or more of the annual turnover of some retailers - is a bellwether for the retail business in the year ahead. This is true even in some countries where Christmas is not traditionally a festive season, not least in the case of the Chinese mainland. Reflecting the fragile and uneven global economic recovery, the 2015 Christmas sales results varied quite considerably from one country to another, especially in the case of the emerging markets. Here there were better showings in China, Mexico, Hungary, Poland and the Czech Republic, but a lacklustre performance in Chile and even more gloomy outcomes in Brazil and Russia. In the developed world, sales gains were recorded in most of the major markets, although the solid growth in Japan was inflated by an influx of mainland tourists, while any increases in France and Italy were notably less pronounced.
Such a development in the traditional markets is certainly good news for Hong Kong exporters, all of whom should look to intensify their sales efforts in a bid to take hold of the reviving business opportunities likely in 2016. They should also be aware, though, that even as consumers are gradually loosening their purse strings, a cautious mood will still prevail. Value-for-money will thus continue to be the mantra for most shoppers, with an ever-expanding proportion of them using the internet to source product information and compare prices. In light of this, importers and retailers are likely to remain conservative, with many still expected to play safe in terms of order size, lead time and pricing. Many of them are also expected to expand their e-tailing activities in order to shore up their sales, while diversifying their sourcing and manufacturing away from the mainland to other lower-cost production bases throughout the Asian region.
While sales to the traditional markets will be crucial thanks to their incipient recovery, Hong Kong exporters should seek out new business opportunities in the emerging markets. As demonstrated by the holiday sales results, there are a number of ready markets in previously untapped regions, although the economic prospects for resource-rich countries are tainted by feeble oil and commodity prices. Besides the fact that the oil-importing emerging economies will benefit from low crude prices, Mexico will continue to piggyback on the US recovery, and Brazil’s 2016 Summer Olympics should also prove a boost to the local economy. Both of these factors should bring increased opportunities for Hong Kong exporters. Of greater importance, of course, is mainland China. Here government endeavours to achieve a moderately prosperous society by 2020, while promoting consumption so as to create a more balanced economic growth, will offer new opportunities for those Hong Kong companies more used to selling into the overseas markets.
- Hong Kong