A retailer's annual performance can be made or broken in the final six weeks of the year. So, at a time when consumer confidence looks brittle, there is a lot riding on retailers' Christmas marketing strategies.
There are certainly signs that some of the UK's biggest stores are putting their money where their mouths are. John Lewis has revealed plans to return to TV this Christmas, after a three-year hiatus, as part of a £6.2m campaign - three times its spend last year. It has raised some rivals' eyebrows, not least Debenhams', which is reducing its TV exposure.
John Lewis marketing director Gill Barr insists the chain is unfazed by worries that the doom and gloom surrounding the economy will affect consumer confidence. She stresses that the reason for increasing spend is not because customers will need greater persuasion to part with their hard-earned cash this Christmas. 'The campaign is not in response to market conditions. Rather, our marketing function is growing, as we get more confident about communicating our brand. John Lewis is an iconic brand and it deserves to be even more famous. We want people to see it as the store of first resort at Christmas. Obviously it is a tough retail climate and we are watching indicators carefully, but we are pleased with our performance so far, which is up 3% for the second half of this year,' she says.
Currys head of brand, Amanda Clift, is similarly upbeat. 'More than half of our annual profits are generated during this three-month period. Despite the uncertain outlook, with rising interest rates, we have prepared well, and are confident that our product pipeline and propositions will excite our customers.' Habitat's UK marketing and PR manager Carla Bowden is also confident, expecting the retailer's 'best Christmas ever'.
Despite this optimism, accountancy firm Ernst & Young forecasts that retailers will dominate the list of companies issuing profit warnings in the key run-up to Christmas, as consumers tighten their purse strings. Other analysts agree that rising interest rates and a slowing housing market will take their toll.
However, Richard Perks, director of retail research at Mintel, says similar prophecies were made last year and the year before, and on both occasions turned out to be unfounded; in 2005 and 2006 retail sales in December jumped 3.7% and 4.7% respectively. 'We are saying exactly the same things as we did last year; that we expect a slowdown. The same is likely to happen this year. Consumers ought to be getting more wary, but they're not,' he says. 'People will go out at the last minute and spend enough to ensure they have a good Christmas, though I don't expect the same surge as we saw in the past two booms.'
That message is repeated by Stephen Fox, managing partner at specialist retail agency Fox Kalomaski. His agency works with several shopping centres and has seen no sign of a sales slowdown so far, though Fox warns this may not last. 'Christmas will hold up and people will go shopping,' he says. 'But January and February may be different. People could see 2008 as a new start and a more austere time.'
Mintel research shows that John Lewis and Marks & Spencer did particularly well last year, with the former seeing a rise of 10.8% in sales and the latter 7.1%. Perks expects both to do well again this year. He predicts that Argos will also do better than its 0.2% growth last year, due to its focus on integrating online and offline channels. As for failures, he points to Woolworths, which he expects to have another bad year, following its sales slump of 4.6% last December. The fact that it has been forced to reassure customers that it will not run out of toys this Christmas, after a safety scandal, has already put it on the back foot.
Toys in general are expected to perform badly, as children's gift lists begin to include items such as computer games, mobile phones and MP3 players from a younger age. Music is also expected to suffer as online downloads become more widespread. By contrast, the popularity of electrical goods is predicted to continue, particularly flat-screen and high-definition TVs. Although there is no major gaming launch, Currys expects Wii, PlayStation3 and Apple products to sell well.
With this host of conflicting predictions to weigh up, retailers' festive marketing strategies are under the spotlight. One major trend appears to be a shift away from price promotions and discounts, which previously have been the typical reaction to nervousness about the economy. House of Fraser, for instance, is reducing its focus on cut-price offers. Reports claim it will spend just 30% of its ad budget flagging up promotions, down from 80% in previous years, as it seeks to boost its upmarket reputation against stores such as Debenhams. Meanwhile, John Lewis, says Barr, is looking to build on its rational message about having thousands of gifts available, but is also seeking to add more emotion to its campaign.
This attempt to forge an emotional connection with consumers is likely to be replicated across the board, according to ZenithOptimedia's head of retail, Darren Guy. He believes it has been triggered by an industry hoping to mirror the success of M&S' activity, which has produced ads that resonate on screen as well as in-store. 'Everyone is looking at M&S to see what they can learn. The key thing is that it has joined up its marketing. When the ad with the chocolate pudding went on air, for example, when you went in store, it was there in front of you,' he says.
Nick Gray, managing director of specialist retail agency Live and Breathe, agrees. He adds that retailers will be focusing more on customer service, the in-store ambience and the spirit of Christmas. 'There will still be price offers, but they won't be articulated in marketing,' he says. Gray also expects some retailers to shift away from the cliched Christmas creative of red-, green- and gold-themed messages featuring rotund Santas, as they seek to stand out.
Celebrities, on the other hand, will be ubiquitous. M&S is to continue its association with Take That by stocking the group's latest album and promoting it in-store. Tesco, meanwhile, has enlisted the reformed Spice Girls to show off its festive fare.
Many retailers are wagering that the emerging trend for shoppers to treat themselves will continue. Boots in particular identified and pushed this aspect last year in its ''Tis the season to be gorgeous' campaign, starring sexy housewives pampering themselves, as well as buying their loved ones presents.
'While consumers have begun to spend later for specific Christmas gifts, many are shopping for themselves, especially in clothing and homewares, from early November. Once the party season kicks in, there are big opportunities around party food or speciality food and wines,' says Susan Aubrey-Cound, M&S group head of marketing, general merchandise and special events. The fact that M&S launched what has been hailed by some as its sexiest-ever lingerie in October is surely an attempt to get shoppers in the mood for the festive season.
Another trend that analysts are predicting will become more pronounced this year is consumers' desire to know where their goods come from and to buy greener products where possible. The Co-operative has already backed this by rolling out a £3m Christmas campaign this month featuring actor John Hannah and highlighting the provenance of its food. Currys, too, has increased its green product range, is making environmental information more readily available and launching a 'take back' scheme enabling customers to recycle their electrical products.
The biggest area of influence this year is likely to be that of online on marketing and distribution. Many retailers have made great strides in this area since last year, as British households rapidly take up broadband: House of Fraser's site went transactional in September; all M&S clothing advertised will now be available online; and Currys is pushing its 'reserve and collect' service, which dovetails well with a web presence.
As a result, digital marketing will become more central to communications this season. Some retailers started their Christmas digital activity in October, such as Woolworths, which has been promoting its Big Red Book catalogue online. John Lewis is running its first digital work this year and most retailers are likely to boost online spend. Last year, most of the top 10 retail spenders dedicated 1% or less of their budget to digital, with the exception of M&S, which spent 3.2% and Debenhams at 2.3%, according to Nielsen Media Research.
Naturally, Interactive Media in Retail Group's (IMRG) marketing director Andrew McClelland is in ebullient mood. He believes that, as well as a marked shift to online purchasing, web addresses will be advertised more widely and investment in search will rise. 'We have seen 30% to 40% increases in online sales each month compared with last year. The Christmas period will see a 50% sales uplift,' he says. In particular, he cites clothing as a growth area, following a bumper Christmas last year for online retailer ASOS.com. Mintel's Perks, though, calls for a reality check, saying 'IMRG overstates business online - it still accounts only for 4% of retail sales'.
For some retailers, it is the post-Christmas period that will bring their biggest online audiences. 'The sale period is hugely important, and thousands of customers go online on Christmas Day to see what we are doing,' says Currys' Clift. In recent years there has been a growing focus on sales as consumers hold off spending; 32% left their shopping late last year compared with 28% in 2005, according to Mintel. In many cases, retailers used sales in early to mid-December in a bid to boost footfall.
But there are signs that retailers plan to reverse this trend, accentuating the quality and desirability of non-sale items. 'The problem with sales is that if you have a high-to-low pricing strategy, customers don't know where they are,' says Barr.
'One of our retail clients is bringing its sale down early this year because it feels that people suffer from the January blues. They are tired of sales, and retailers would be better to lead with a completely fresh offer and look,' adds Gray.
Over the next two months it will become clear how these plans unfold. And with retail competition more ferocious than ever, those without the right strategies will face a depressing New Year.
Debenhams
Last year, Debenhams' Christmas campaign kicked off in early November, with the retailer spending more than £4m on activity in December. TV dominated the budget, accounting for 45% of spend from October to January, followed by 24% on press and 22% on direct, according to Nielsen Media Research. The campaign featured a dancing Santa and actor Jaime Murray.
The retailer has no TV work planned for this year, suggesting it did not prove as effective as it had hoped. Instead, according to brand manager Jess Burnet, Debenhams will 'have a significant press presence'.
The campaign focuses on gifts such as watches, men's accessories and fragrances. 'It will also feature party-wear, kids' fashion, toys and menswear as well as still-life ads showing perfect presents,' says Burnet. This style- and product-led strategy is in stark contrast to last year, illustrating Debenhams' hope that this approach will lure shoppers more than a Christmas cliche.
John Lewis
Christmas 2006 was notable for John Lewis' absence from our TV screens. It invested only £5.2m from October to January, according to Nielsen Media Research. Its closest rivals, Debenhams and Marks & Spencer, spent £10.8m and £10.5m respectively.
Marketing was focused on press ads designed to push its breadth of range, but when marketing director Gill Barr joined in January 2007, as the retailer's first board-level marketer, she immediately recommended that John Lewis promote itself more at Christmas.
This year, as well as TV, it will use other media channels including press, cinema, outdoor, direct and, for the first time, digital. The campaign also aims to create a more emotional message. Barr hopes, too, that media coverage of the retailer's addition of a food hall to its Oxford Street store will also keep John Lewis front of mind.
One of John Lewis' biggest priorities, according to Barr, is to beat its rivals by offering better customer service.
Habitat
Habitat's marketing of 12 months ago revolved around a press campaign featuring furniture in November and gifts in December. The major difference this year is that the campaign is far more integrated.
Press continues to be key, with a campaign running across nine national glossy magazines including Eve and Elle, including mini-catalogue inserts and display ads from early December. Habitat will also be experimenting with outdoor ads in London, consisting of Underground six-sheets, bus liners and 48-sheet cross tracks. It is also hoping to create a buzz around its Cheltenham store launch, which it is pushing via radio and outdoor.
Creating a luxurious in-store environment on the theme of 'feast and indulge' also forms part of its strategy to lure customers away from bigger rivals. It is running promotional offers such as free gifts with purchases and in-store shopping nights with partners such as Elle Decoration.
Marks & Spencer
Marks & Spencer's Christmas ad is fast becoming a festive treasure, with last year's Shirley Bassey execution resonating well with consumers. TV ads led the way in terms of spend (47% of budget), followed by outdoor (21%), press (13%) and direct (5%), according to Nielsen Media Research.
This year's Christmas ads have a vintage Hollywood theme and star Antonio Banderas alongside the usual crowd of Twiggy, Erin O'Connor and Lizzie Jagger. The TV ads will be accompanied by press and radio work, and the company will promote food as well as partywear.
In addition, M&S' annual 'three for two' offer, which launched on 22 October, is likely to remain a popular feature throughout the period. Meanwhile the M&S Christmas Gift Guide went out in the national weekend press last month to launch the in-store offer, which is also available online.
Christmas 2006
- Analysts predicted mixed fortunes for Christmas 2006 after interest rate rises created uncertainty about consumer confidence.A slow start to December led several retailers to offer discounts to lure shoppers into stores - Thresher, Urban Outfitters and the Conran shop all circulated online vouchers.
- However, a surge in consumer spending in the final two weeks before Christmas led to a 2.6% rise in like-for-like sales during December, according to the British Retail Consortium. Big winners included Marks & Spencer and John Lewis, while HMV and Debenhams suffered.
- Online sales were up 54% to £7.7bn in the 10 weeks to Christmas, according to the Interactive Media in Retail Group.
- The post-Christmas sales started briskly, with first-day shopper numbers up 7% year on year, according to Footfall. However, traffic slowed down after a couple of days.