Sluggish Christmas for retailers
Retail Roundup: Seasonal tidings of a slow rise in sales volumes come true as high street launches January sales.
Christmas tidings for IT retailers ranged from joy to bleak resignation to the state of the economy as the dust settled on a season of mixed blessings.
The likes of Tiny and Dixons promptly embarked on their January sales amid cautious murmuring from, among others, the Confederation of British Industry (CBI), which revealed that retail sales volumes rose slightly across the board in December.
Alastair Eperon, chairman of the CBI's distributive trades survey panel, said: 'Retailers anticipated consumer confidence would remain low. They were not expecting - and did not experience - a significant rise in sales volumes in the run-up to Christmas. The modest growth in trade is expected to continue, but this will depend on the success of the January sales.'
Michael Kraftman, marketing and technical director at Tempo, said: 'The run-up to Christmas was healthy, but when our winter sale started it went bananas. Volume is up dramatically and revenue is up, but not as much as one would expect because the selling price has dropped. This year, the entry level PC price for most retailers is #499.'
Kraftman added that Tempo planned to open eight stores and launch a transactional Website in spring: 'Online shopping is one of those things everyone knows is going to happen, they just don't know when. We decided to invest in it this year.'
At Mesh, Christmas fizzled rather than exploded. A representative said: 'It was more solid than exciting. We had done well over the period, which raised expectations for Christmas.' However it has not dented its opening schedule, with showrooms opening in Leeds and Dubai.
The Christmas success story came from Electronics Boutique. A trading statement revealed the games giant was 31 per cent ahead of the previous Christmas and 30 per cent ahead for the year. It achieved its aim of having 176 stores open by Christmas, including 17 Debenhams concessions.
John Steinbrecher, chief executive of Electronics Boutique, said: 'This was an excellent Christmas trading period. Record sales of PlayStations were supported by a strong software line-up. In the UK, the combined installed base of PlayStation and Nintendo 64 consoles roughly doubled to more than five million during 1998, which should make 1999 an excellent year for software sales.'
A representative for Tiny claimed successes: 'The run-up to Christmas was fantastic - the most we ever sold. January is rolling along satisfactorily. The market is buoyant.'
A further boost came with the 0.25 per cent interest rate cut on 7 January. Ann Robinson, director general of the British Retail Consortium (BRC), stated: 'Retailers hope this further reduction in mortgage costs will put consumers in a better frame of mind after weak demand over the past four months.'
ONLINE SHOPPING - US vs UK
The 1998 Christmas period was a landmark for the US as online spending rocketed, while the UK's online retailing was more of a damp squib.
US research company Yankee Group predicted December's online shoppers would spend $2.55 billion, 34 per cent of the predicted 1998 spend of $7.2 billion. '1998 will be remembered as a landmark for online retailing,' said Melissa Bane, internet market strategies programme manager at the Yankee Group. 'We expect 1998 internet holiday sales to come close to the total online sales in 1997.'
According to internet analyst Zona Research, the amount spent by online shoppers grew almost 200 per cent, with the average spend rising from $219 to $629.
While UK consumers are slowly overcoming fears about security, retailers have yet to offer consumers compelling reasons to shop online. The latest report from Fletcher Research estimates UK online sales in 1998, excluding financial services, at #230 million.
Only 12 per cent of UK internet users are active online consumers. Benjamin Ensor, lead author of the report, said: 'UK retailers must realise the rules change when they sell online. Although the Web is seen as a low-cost medium, there are significant delivery and marketing costs. In most cases, online shops will only make money if customers come back time and again.'
by Angela Soane and Steven Palmer.