Food and grocery retailers are in for another big Christmas
When many of us think about Christmas shopping a number of things that come to mind. Perhaps we imagine people walking down the street loaded with bags; or wandering into shop after shop looking for the perfect gift for the family member who has everything; or we may even think about the stress of finding a place to park if we wait till last minute to complete our shopping. However, the things consumers spend the most on at Christmas is often the thing we think about the least: food and drink.
While the hospitality sector does see growth during this time, it doesn't mean Kiwis are only spending money eating and drinking out. In fact, it is actually the food, grocery stores and liquor stores who are benefiting from Kiwis loosening their purse strings at Christmas time. Not only do most shoppers have to spend money at these types of retailers for one reason or another, they choose in many cases to spend more than any other month of the year. This is attributed to the additional festivities, work functions, the occasional casual get together and the all-out Christmas feasts. Additionally, for anyone travelling, food purchased in the lead up to Christmas is often intended to last for a week's holiday or beyond.
According to Stats NZ, retailing in New Zealand during the December 2017 quarter saw an increase of $444 million overall, of which the food sector saw an increase of over $76 million. It is clear that food retailers did well last Christmas, particularly amid fierce price competition. We saw similar results in 2017 from Australia, and consumers in the UK spent nearly £500 million more on groceries in December 2017 than the year prior. Heading into the 2018 Christmas season, we are expecting for growth to continue for the grocery and alcohol sectors, despite shoppers starting to feel the squeeze on disposable incomes. Growth is also likely to be gained from increases in online sales and the timing of Christmas Day 2018.
Shopping online at Christmas is not just for gifting
While online sales will continue to increase for most retailers throughout the Christmas period, majority of that shopping does not include items that can wait till the last minute. That is where the food retailers have a significant advantage. Offering online orders, and especially deliveries to customers when possible, can make for a great point of difference in a speciality food retailer's business. This could be a special order at the local butcher or green grocer, a custom cake from the bakery, or thoughtful gifts from a chocolatier. Whatever the business, having an online presence is crucial for marketing and sales purposes, and just as important for food retailers as other retail categories.
Most consumers have fairly full calendars in December to accommodate a number of social gatherings or holidays away in the lead up to Christmas, so it seems reasonable that grocery shopping would be one priority a number of Kiwis would like to have some assistance with, and online is a key means of assistance. But while there are always pros and cons of shopping online, the same applies for grocery shopping. Of course, the most obvious being that someone else is picking out your items for you. Categories such as produce, meat or freshly prepared food can be something consumers are quite specific about. However, there is also the possibility that the store which your order is picked from does not have an item on your list, which may override the convenience of grocery shopping online if a separate trip is required to pick up the missing items elsewhere or at another time.
What spending trends food retailers can expect this Christmas?
With consumers feeling the pressure about a number of other essential costs such as petrol, rising rates or the cost of travel in the lead up to Christmas, it is expected that some sacrifices will be made. For example, switching from name brand products to generic brands; or only buying certain items when they are on special, such as chocolate. Price competition in this industry is incredibly aggressive, so it is unlikely a large portion of consumers will opt to go without certain grocery items this Christmas season, and instead just look for the best deals and stock up early.
More than half of Kiwis travel or take a holiday during the Christmas period, and for many that means heading out of town to the homes of relatives or friends, baches, or remote locations. This requires millions of New Zealand consumers to plan ahead and stock up on supplies from supermarket and grocery stores. Savvy shoppers spread this out over a couple weeks and leave the perishables till the last minute, while others do a major shop all in one go. We can expect to see increased spending week on week for the month of December in the lead up to what will become the busiest shopping day of the year for supermarkets and grocery stores.
December 21 will be the busiest shopping day for food & beverage stores
The way the calendar works out, Christmas Day falls on a Tuesday this year, meaning the majority of travellers will be getting out of town sometime over the preceding weekend. For this reason, we expect food and beverage stores to have their busiest day in December, and likely for the year, on Friday December 21. For many customers, this will be their last chance to hit the shops before leaving town, and others will be wishing to avoid additional crowds as we get closer and closer to Christmas Day.
It is common for e-commerce platforms to include a gift guide in the lead up to Christmas. Break it down into categories or price points if that applies to you and your customer. Demonstrate to consumers why your business has something for everyone and can be a one-stop-shop. Whether or not you operate a bricks and mortar store as well, you'll need to start preparing in the coming months for increases in online sales. Nearly 40 million packages were delivered by NZ Post alone last December, a number expected to increase in 2018. It will be crucial for retailers to ensure that they are not underdelivering in their online operations.
Christmas Eve will be the second busiest shopping day for supermarkets and grocery stores. It is often last-minute items the consumer forgot to pick up initially that they discover as they prepare for the big day. It is also full of those who are waiting till the last minute to ensure freshness, or who just haven't had the time to get to the grocery store yet. It will also be a big day for stocking up on last minute beverages in the run up to Christmas Day, when most shops are not open for trade.
The only way to avoid the mad rush as the December days tick off one by one is to plan ahead, make a thorough list and check it twice.
by Scott Fisher, Retail NZ CEO
Published in the 5th November edition of Talking Shop.