Retailers have traditionally looked forward to the three months running up to Christmas as a golden quarter for sales. But the credit crunch and consumer fears of recession meant 2007's pre-Christmas rush only got going once retailers had slashed prices - in effect bringing the January sales forward to mid-December.
Since then, consumer confidence has become increasingly shaken as the credit crunch has continued to bite.
So it comes as no surprise that old-fashioned Christmas clubs may be making a comeback, even spreading out of their regional heartlands to attract a broader range of users in both class and location.
"I'm convinced we're attracting a wider audience," says Dave Kennedy, group managing director of One4all, which runs the Christmas club operated by the Post Office. "We are communicating with geographical areas that are not traditionally associated with this kind of scheme."
Launched in February, the scheme is a card-based product on a semi-open loop, based on the Visa Electron platform. It is valid in all of One4all's 25,000-plus participating retail outlets in the UK. Typically, users join in October or November for Christmas the following year, although some join as late as the September before Christmas. The money on the card is not released until November, and the card remains open until mid-January so users can take advantage of the sales.
Sensible planning
Traditionally, Christmas clubs have tended to operate in northern England, Scotland, Northern Ireland, some south coast towns such as Southampton and Portsmouth, and North and South Wales. In class terms, they've historically attracted C2DEs, but this could be changing.
"The scheme has gone into post offices in all areas, rich and poor," says Kennedy. "Many people need to put money aside for Christmas - it's sensible financial planning. Many people end up in debt after Christmas and spend months paying it off. Next year we'll be widening the net."
Andrew Johnson, director-general of voucher body the VA, thinks more upmarket consumers may be learning to love old-fashioned budgeting. "The current climate might widen the reach of cards and savings schemes," he says. "The middle classes have tended to budget using credit cards, but this might be more prudent."
He also points to advantages for retailers to launch and promote such schemes by linking retail promotions to saving and spending. The Woolworths Christmas Club adds a cash bonus to its club members' cards based on how much they have managed to put aside by November. Bonuses range from £1 for £49-£96 saved, to £10 for savings over £240, and it is this carrot that aims to prevent consumers dipping into the money earlier in the year, rather than any embargo. Argos, which is trialling a Christmas club scheme in part of the country, also uses the carrot approach, offering a £1 bonus on the first £5 of saving, then £1 for each £25 after that. The maximum is £13 after reaching £250 of savings.
The Woolworths scheme, a spinoff from its giftcard operation, has been in operation for three years. "There is a central core of people who have a saving requirement for Christmas," says retail development manager Alan Kellock. "Woolworths is seen as an ideal candidate for families buying toys and gifts."
The club launches immediately after Christmas with some users depositing money on Boxing Day. Most take-up is in January and February. Saving tends to ease off during holiday times but sees a surge in November.
Financial Services Authority rules actually prevent Christmas clubs from locking away consumer cash absolutely, so if someone wants to take out their money in August, they can. Even the Post Office block on spending is voluntary. "It's in the terms and conditions, but we don't talk about it," says Kennedy. "People who put money aside for Christmas don't want to get access to the funds." But if users do require early redemption, the Post Office must accede to their wishes.
It's for this reason that some believe a stamp-based mechanic is a better way to put money aside for Christmas. "A card in your wallet is a temptation to spend immediately," says Johnson. "Vouchers or stamps are a little less tempting." They can also appeal to certain demographics, such as older consumers. House of Fraser business incentives manager Catherine Forrest says: "Our experience is that paper vouchers are still extremely popular, and that there's a very high usage in the run-up to and after Christmas."
Maximum security
Other retailers have also moved in on the market, partly as a response to the collapse of the Farepak scheme in 2006, which left 140,000 low-income families out of pocket. Although the Post Office scheme predates Farepak, both Woolworths and Argos launched theirs last year, emphasising the advantage of saving with a well-established name.
Kellock says the Christmas club has seen "steady growth" and notes that the Farepak effect "knocked consumer confidence". He also points out that Woolworths is 100 years old, so is a trusted brand with longevity. Trust is also a key attribute of the Post Office, claims Kennedy, while Argos managing director Sara Weller says: "As Argos is one of the high street's most trusted retailers, we are ideally placed to ensure maximum security of our customers' savings." But Christmas clubs do still exist beyond the high street, and the sector has striven to clean up its act with the creation of the Christmas Pre-payment Association (CPA). The four major suppliers currently under its umbrella are Country Christmas Savings, Family Christmas Savings, Park Christmas Savings and Variety Christmas Savings Club.
CPA independent director of consumer affairs Suzy Hall believes Christmas clubs offer a range of benefits to consumers and are a welcome relief from credit culture. "The perception that these schemes only attract low-income families and those classed as the unbanked is outdated," she says. "The savers who reside in all areas of the UK are disciplined people who prefer to save a little each week or fortnight rather than putting Christmas on a credit card. Financially, they're probably better off than those who can't afford to pay off their card bill in one go."
Other benefits include the sociability of this kind of community-based saving, particularly for older customers.
So, does the future belong to the Christmas club? While the Post Office and Woolworths say they are happy with take-up, Argos says its Christmas club trial "has yet to be concluded" and so has not decided to pursue a nationwide 2008 roll-out beyond its 100 stores in Greater Manchester, the north west and the north east of England.
More bad news from the financial markets could give Christmas clubs the boost they need to reach the mainstream - making prudence fashionable once again.
HARK AT THESE FESTIVE LOYALTY SCHEMES
Multi-retailer loyalty card Nectar runs a number of Christmas-specific points offers, especially through its online shopping portal, eStores. This offers points - usually two per £1 spent - on purchases from more than 200 online retailers including Amazon, eBay, Dell and CD-WOW when consumers visit their sites via the eStores portal. Negotiations for Christmas 2008 offers typically start in September. Last year's Christmas offering included both double and triple points at a range of retailers, including Body Shop, La Senza, Ernest Jones, Figleaves and PC World.
Points offers are enhanced when consumers use Nectar's credit card offering to make seasonal eStores purchases. The card, issued by American Express, offers double points when used in conjunction with a Nectar card. In addition, it offers 5,000 Nectar bonus points when users spend £200 on their card within the first 90 days of membership, as well as double Nectar points on purchases for the first three months.
Spending offers are available through www.nectar.com/rewards. Rewards include spa sessions, wine, family days out or DVD offers. Monthly 'Star Treats' involve special deals on a variety of items for a limited period of time each month on a first come, first served basis. November and December Star Treats put the focus on gift ideas for Christmas.