Will Marks & Spencer be offering a Christmas meal for two for less than a tenner and which cash-strapped celebrity will be appearing in the latest Morrisons ad? While these questions have yet to be answered, as retailers keep their festive marketing plans under wraps, analysts believe it is a certainty that consumers will be spending significantly less this Christmas.
Retailers, like consumers, have their eyes firmly on the purse strings - and the traditional festive splurge is under pressure. 'Confidence is at a very low ebb,' says Richard Hyman, a strategic adviser to Deloitte UK. 'People have less money to spend than ever before, with obvious consequences. It is going to be awful.' Nick Bubb, retail analyst at broker Pali International, believes sales could be down as much as 10% on 2007, making it the worst festive trading period since the 70s. 'People will still want to spend on Christmas, but they will want to spend 5% or 10% less,' he says. 'It is becoming fashionable to be frugal. Shopping will be late and that will put pressure on margins.'
Advertising budgets, as the biggest area of discretionary spend at most companies, are also under pressure. ZenithOptimedia recently cut its outlook for total adspend growth in the UK for this year to 0.4%, while UBS, the Swiss bank, is predicting advertising growth across all channels to be -1.9%, compared with 6.1% in 2007. Most City analysts are clawing back forecasts, with television advertising marked down the most to about -9% for 2009.
The Advertising Forecast, compiled by the Advertising Association and World Advertising Research Center, predicts that UK adspend will fall 0.1% on the same period last year. With the exception of the internet and outdoor/transport, all media are forecast to be hit in the last three months of the year, with adspend declining 6.3% for regional newspapers, 4.8% for TV and 4.1% for consumer magazines.
Yet within the retail sector, anecdotal evidence suggests that the major retailers are not cutting festive marketing budgets. 'Clients are, generally speaking, pushing [ahead with campaigns] rather than pulling them,' says Chris Locke, UK trading director at Publicis Groupe's VivaKi.
Many stores will make most of their annual sales in the few weeks leading up to Christmas, and marketing is paramount. Last year, supermarket group Morrisons spent £18.29m on its festive campaign, according to Nielsen Media Research, just behind Tesco, which was the highest-spending grocer at £18.6m. Morrisons' investment, which was up on the previous year's budget, paid for a slew of celebrity endorsements. It worked, with the supermarket group posting a 9.5% rise in underlying sales in the six weeks to 6 January 2008, the best in the sector. The chain said the campaign had pulled in 4m additional customers.
Last year, many analysts predicted a dire Christmas. But with sales up 0.3% against growth of 2.5% in 2006, according to the British Retail Consortium, it was not as bad as feared. No one is expecting a similarly positive outcome this year, however.
'We are going to see a much stronger effect,' says Antonia Branston, retailing analyst at Euromonitor. 'Then, people were worried about what was going to happen. Now it has happened and people are concerned about their financial situation.'
Fight for footfall
There is no doubt retailers face an even tougher battle than usual to tempt shoppers unsettled by continual front-page stories about financial meltdown. 'Consumers are really savvy and they expect a deal,' says Locke. 'They don't want to pay more for everything. Retailers have to lure them into stores, and one way of doing that is value.'
It will, however, be important to target the message correctly. 'The focus will be on value in the truest sense of the word, not just low cost,' says Andrew McGuinness, chief executive of ad agency Beattie McGuinness Bungay. 'Supermarkets will be saying "come to us for everything, from basics to luxuries". It will be a merger of the two, whereas normally they would just be pushing the premium ranges.'
As ever, retail marketers are attempting to keep their Christmas campaigns close to their chests. Nonetheless, a spokeswoman for Asda confirmed the chain will be 'driving the value message' this year, while a Tesco spokeswoman says: 'It's not just about giving customers the best possible price. People want quality, choice and service, as well. People are concerned. But that's when a business like Tesco thrives.'
Premium-priced retailers M&S and Waitrose have been running 'dine in for £10' campaigns, while Sainsbury's has a 'switch and save' focus on value. Analysts have identified a 'trading down' process, where retailers such as M&S and John Lewis lose business to value chains and discounters offering limited ranges at rock-bottom prices. TNS Worldpanel sales data for the 12 weeks to 5 October showed Aldi up 22.1%, Lidl 9.8% and Netto 3.6%. While their share of the grocery market is only about 3%, such retailers are expected to do well this Christmas. Aldi has even signed up TV chef Phil Vickery; traditionally, discounters do not spend much on marketing, as costs are kept at a minimum.
Elsewhere, Argos has launched a campaign focused on simplicity that mocks the excessive fuss created by many big retailers at Christmas. M&S' festive campaign is expected to once again feature Take That, alongside celebrities such as Myleene Klass and Erin O'Connor. Morrisons is also expected to continue using famous names.
'We all need Christmas this year more than ever,' says McGuinness. 'It's escapism. TV is for generating excitement and lust for products, which can be backed up with strong pricing messages in store.' Locke also believes TV advertising is unlikely to be scaled back. 'TV allows you to get the emotional message across,' he says. 'Print is for the practicalities.'
Then there is the question of timing. Last year, much of December was a wash-out as consumers left shopping until the last minute. Executives waited nervously to see whether they would achieve the right margins. As no retailer wants to go into January with a stock overhang, many will start Christmas trading this year with lower levels than normal, making it imperative to sell the stock they do have at full price.
One way to do that is to encourage consumers to start shopping early. Some, including department store Debenhams and fashion chain Next, had festive window displays last month - most tend to wait until after Halloween - while Argos and Tesco have launched Christmas catalogues.
Tesco is tight-lipped about when it will launch its main Christmas campaign, claiming a date has yet to be set (last year it was 12 November). But for online and catalogue shopping, festive activity is well under way. Tesco.com's homepage has a 'Christmas Collection' link to a festive page featuring the slogan, 'Be prepared for Christmas - buy now, spend less'. Offers include 'toys that won't break the piggy bank' and free delivery on non-food items.
Christmas hasn't been cancelled. Despite the gloomy outlook, gifts and festive food will still be bought; Hyman believes that consumers will spend more than £30bn this year. Nonetheless, such a total would be down on 2007, which means that the festive battle between the UK's under-pressure retailers will be tougher than ever.