Santa’s sack will be a little lighter this year, with Australians expected to spend less on Christmas presents this year.
A Westpac-Melbourne Institute survey suggests that the average consumer is expected to spend around $419 this year, 10% below 2011, although Queenslanders are expected to spend 28% less than they did last year. Just 13% of respondents expect to spend more this year.
For those of you expecting generous gifts from the older family members, be warned that those aged over 55 are tightening up on spending – which may be a result of falling interest rates and lacklustre equities markets (in the last month or so) – thereby cutting their disposable incomes.
The survey also suggests that retailers could be in for a flat Christmas. As the next two months are the most important months of the year for many retailers, the news will be disappointing.
Plans to kick start consumer spending has seen hundreds of retailers join together for a 24-hour Click Frenzy tonight. Department store owner, David Jones Limited (ASX: DJS) has decided to hold its own rival sale, called Christmas Frenzy. Discounts of up to 40% will be available in-store between 9.30am until 10pm and online from 6am until midnight.
The sales come as many of Australia’s biggest retailers have negotiated discounts with suppliers, on hundreds of products by as much as 50% in recent years, due to greater global price transparency. Myer Holdings Limited (ASX: MYR), David Jones, JB Hi-Fi Limited (ASX: JBH) and Harvey Norman Holdings Limited (ASX: HVN) have all received lower wholesale prices, enabling them to compete with offshore online retailers.
Australian consumers are the winners, with prices in-store now much lower than we were paying a year ago.
The Foolish bottom line
The growth of online shopping has had an unexpected benefit for local bricks-and-mortar retailers. They’ve been able to see prices that offshore online retailers are charging for their products, and have then been able to go back to the suppliers and negotiate lower prices. Despite better prices, it seems weak consumer sentiment has again doomed retailers to a flat Christmas spend.
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Motley Fool writer/analyst Mike King owns shares in David Jones and JB Hi-Fi. The Motley Fool’s purpose is to help the world invest, better. Take Stock is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it’s still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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