Published Tuesday 28th December 2021

It’s safe to say that last Christmas was very different to any other in recent years. The COVID-19 pandemic meant that festive plans were cancelled – often at the last minute – and waves of lockdowns made Christmas shopping almost impossible.

Although there were high hopes that we’d be able to revert back to pre-COVID habits and behaviour this Christmas, it looks like we’ll be facing another unique and uncertain festive period in 2021, thanks to the ongoing pandemic coupled with supply chain issues.

What can businesses and consumers expect?

Spending Starting Earlier

2020 saw many people curtail their spending in the face of uncertainty around the COVID-19 pandemic. Large numbers of the population were placed on furlough or lost work entirely. Others preferred to focus on saving instead of spending money on non-essentials. However, it’s felt that consumers want to make this Christmas extra special after many were away from loved ones last year.

As a result, we’re now seeing a release of pent-up demand from consumers, who see this Christmas as an opportunity to spend some of their pandemic savings and enjoy social experiences that were denied to them over the past 18 months. Deloitte’s 2021 Holiday Retail Survey indicates that the average holiday spending is up by 5% year over year, although this is predominantly driven by high-income households.

Andrew Goodacre, CEO of the British Independent Retailers Association, foresees a “bumper time for retailers with demand being higher” – the outlook is particularly positive for small businesses, with customers ready to make it a year to remember. This enthusiasm to start Christmas shopping sooner has also led retailers to start things like Black Friday promotions earlier than usual.

This year, two-thirds of people in the UK plan to get together over the Christmas period, which means more opportunities for gifting, socialising and greater spending.

Continued COVID Uncertainty

Another reason for this early start to holiday spending is continued global uncertainty. With concerns over stock levels, delivery times and the impact of COVID-19, 21% of consumers are looking to shop earlier than usual, particularly younger age groups – more than half of the public were estimated to have completed their Christmas shopping before the end of November.

Last year’s last-minute lockdown in the UK also made customers realise that the option of emergency shopping in the days immediately before Christmas might suddenly be taken away. This has contributed to consumers finalising their Christmas shopping much earlier in the year than usual.

Lack of Stock and Lack of Discounts

The trend towards earlier holiday spending is also partly driven by concerns over the supply chain. The logistical issues that businesses have been facing due to COVID-19 and Brexit are still making headlines, and it’s likely that most people have visited a shop in the last few months only to find empty shelves.

Tim Payne, managing director of footwear retailer Charles Clinkard, said: “Many customers are aware of the supply chain issues retail is currently facing as it’s been so widely reported in the media. Overall, this is a genuine picture. However, there is a bit of scaremongering that has resulted in a noticeably earlier build-up.”

Deloitte’s Holiday Retail Survey found that 75% of shoppers are concerned that stores will be out of stock this year – a concern that’s echoed by retailers, 68% of whom have worries about receiving inventory in time for the holidays.

Food Shortages and Disruptions to Food Supply Chains

There are also worries about a potential festive food crisis, with stories circulating in the media about the lack of turkeys for Christmas dinner because of the ongoing supply chain and labour shortage problems.

Ian Wright of the Food and Drink Federation is quoted as saying: ‘The UK shopper and consumer could have previously expected just about any product they want to be on the [supermarket] shelf or in the restaurant all the time. That’s over. And I don’t think it’s coming back.’ With industry experts coming out with comments like this, it’s no surprise that consumers are bringing forward their holiday shopping so they don’t miss out.

How Can Businesses Take Advantage of the Situation?

However, there are still opportunities for businesses. Lack of product availability plus strong consumer demand means that retailers do not have to use discounts or reduce prices to entice shoppers this year.

This sentiment has been confirmed by Andrew Firth, Retail Think Tank panel member from Ipsos Channel Performance, who has observed: “Limited availability of stock is creating strong pricing dynamics, which means there is no need for retailers to offer big discounts to consumers this Christmas. With media reporting supply issues and encouraging consumers to shop early to avoid disappointment, the psychology of the marketplace will act as a catalyst for consumers buying limited stock at any price.”

Everything is Getting More Expensive

The lack of any special seasonal offers will no doubt come as bad news to consumers, especially this year. Although Deloitte’s Holiday Retail Survey found that 60% of consumers say that ‘getting a great deal’ is their top reason for choosing a particular retailer, rising inflation also means this sort of ‘great deal’ is increasingly unlikely.

Jostling for space next to the supply chain headlines is the news about cost of living increases. Rising energy costs and labour shortages have driven up inflation, and shoppers face the biggest price rises in more than 30 years. Retail prices, in particular, have been pushed higher for the first time since May 2019, and a typical UK family will spend £1,700 more per year on household costs in 2022, according to a forecast for BBC Panorama.

And Christmas 2021 is going to cost people more too. On top of things like food and presents, Christmas trees are more expensive and will be harder to come by this year due to increased demand, as well as droughts and fires over the summer which damaged supply. Even sundry items like wrapping paper and cards will cost 7.3% more than this time last year.

None of this has put people off though, and the effects of inflation are yet to fully filter through to consumers. Shoppers are still determined to spend whatever they need to this festive season, driven by the desire for an extra special Christmas after the challenges of the last 18 months, or for one final splurge before the reality of the new year bites.

No matter what challenges the festive period is throwing at your business this year, our expertise can support you. Get in touch with the Expense Reduction Analysts team today to find out how we could help your business develop an effective cost reduction strategy, along with other advice and guidance.