Last Christmas… retailers must respond decisively to the fallout from the festive period

After adapting to the seismic challenge of the pandemic and scrambling to adapt to shifting demands, some retailers may have hoped that the recent Christmas period would provide a welcome boost. However, with economic headwinds, and supply issues caused by factors such as China’s Covid-19 approach, and strikes in key industries, it was a period that brought significant hurdles to get over.

We recently surveyed 2,000 people in the UK to get a temperature check on spending in December, what we can expect as we enter 2023 and how this might impact retailers.

What we found

The survey found that almost half of the Brits surveyed (49%) experienced a delay of 5 or more days receiving items they bought online during the 2022 festive period, with just over a quarter (26%) experiencing this over multiple items and nearly half (46%) finding items they wanted to purchase unavailable.

The findings also revealed a quarter of those (26%) who celebrated Christmas returned gifts they had purchased because they arrived too late or were not as expected, with 13% returning up to 10% or more of their gifts. Younger adults aged 18-34 were found to be most likely to have experienced both events (67% and 65%, respectively).

Additionally, a quarter of Brits (24%) claimed to have spent more in December 2022 than they did in December 2021, with two-fifths (41%) spending the same amount and over a quarter (26%) spending less.

Other key findings from the research include:

  • The unavailability of items or fears about postal delays meant a fifth of Brits (20%) spent more than they were planning on a similar item.
  • Young people between the age of 18-34 were 35% more likely to return items that they originally bought as a gift.
  • Londoners were the most likely to return a gift (44%) compared to the national average (31%).
  • Those living in Brighton were most likely to be hit with delays (62%) compared to 36% of those in Newcastle.

What this means for retailers

The festive period shone a light on the ongoing impact of supply chain disruptions and the impact these have on both consumers and retail businesses. Importantly it also highlighted that for all the talk of China being the epicenter of disruption, there are also challenges closer to home. In this instance, failure to tackle the final mile problem led to some retailers losing up to a week’s work of peak trading performance.

For consumers, it means more money spent, missed gifts, and returns during a time when they are already feeling the crunch. This points towards lower spending in Q1, but will it also cause any damage to the consumers’ relationships with retailers and brands? There seemed to be a certain amount of goodwill during “peak covid” and “peak disruption” times, but is that still true? Retailers will need to watch the data and take note of any fallout. Expect Advertising, Branding, and Customer Experience to re-emerge as top priorities in 2023.

Financially it’s not just about lower trading income in Q1 for retailers. Unwanted gifts and unwanted sale items may all for part of the returns tsunami, which could emerge in January 2023. Returns handling comes at a cost, and that cost must somehow be factored into the price to maintain sustainable profitability levels.

So, what can retailers do? Well, a lot of good work has already been done. We’ve seen short-term investments in supply chain resilience and a focus on starting the longer-term strategic projects that will drive greater agility, resilience, and transparency of supply chains. Of course, all of these come at a cost and must be foundered either through reducing cost or growing margin, thrusting cost transformation, sustainability, data, marketing, and customer experience to the fore also.

2023 is a year of many competing priorities. But not one without hope. It will be a year of bold plans to get big results. Take a look at our Retail Report for trends shaping the sector.

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