The past few days have launched the 2015 Christmas ad wars with John Lewis, M&S, Boots, TK Maxx, Curry’s PCWorld, Waitrose, Burberry, Argos, Asda and Very among the retailers involved. It is great to have retailing the focus of debate in the contexts of culture, aesthetics and art forms. And Christmas is a time for giving. But does it generate incremental profitable sales? Or is it an expensive corporate self-indulgence?
Last year John Lewis spent some £7m on its Christmas ad campaign and reported a 4.8% increase in LFL sales over the period. Was this was enough to pay for it? And John Lewis was one of the very best performers. Many of the other big spenders over Christmas last year (Tesco, Sainsbury’s, M&S for example) reported LFL declines. But this year they are all back for more.
A year ago in non-foods, November YOY sales by value rose by 9.0%, the biggest increase by far over the past 15 years. Meanwhile December was up by 3.5% YOY. Sounds not too bad but price deflation was -1.8%. In other words retailers had to sacrifice margin to achieve that number, and at Christmas when they need full margin. Price deflation over Christmas on that scale was last seen on December 2008 when Lehmans had collapsed and people thought the end of the economic world had come!!
These numbers reflect the Black Friday effect and at the eleventh hour, some retailers are suggesting they are “turning down the dial” this year. We’ll see. Most of the industry for most of the rest of the year has found it impossible to jump off the price-promotion bandwagon so how will Black Friday be any different?
** We have detailed forecasts for Black Friday, Christmas 2015 and next year. Get in touch for access at firstname.lastname@example.org