Christmas retail sales forecast to rise by €2.4 billion (0.8%) in Europe this year compared to 2009. However, while offline sales are set to decline by 1.4% on average against last year, internet sales are forecast to soar by 25% ^[1]

• Growth in Christmas retail sales expected to slow across Europe, with total sales predicted to rise by just 0.8% (€2.4bn) this year, compared to 1.8% (€5.4bn) between 2008 and 2009^[2]

• In total, Christmas sales forecast to hit €313 billion across Europe in 2010, of which over €32 billion (10.3%) is expected to be spent online, that’s over 10 cents for every euro spent compared to 7 cents in 2008^[3]

• Predictions reveal European offline Christmas sales set to fall by 1.4%, from €284.9bn last year to €280.9bn in 2010 – a €4.1 billion decrease^[2]

• Conversely, online Christmas sales expected to rise by 51.4% or €10.9bn since 2008, and by 25.1% (€6.4bn) this Christmas alone^[2]

• Denmark (-3.2%), Norway (-1.9%), Spain (-1.2%) and Italy (-0.5%) set to experience a fall in overall Christmas spending in comparison to 2009. Highest retail growth expected in Sweden (4.3%), Germany (1.9%), the UK (1.3%) and France (1%)^[2]

• UK consumers to spend the most overall (€77.2bn), followed by those in Germany (€64.5bn), and France (€62.5bn) – accounting for 65% of all retail spending in Europe at Christmas^[1]

• The Netherlands set to experience highest growth in festive online retail sales (36.8%), followed by France (30.7%) and the UK (28.8%)^[2]

EMBARGOED UNTIL Wednesday 27^th October 2010. With Christmas typically accounting for up to 25% of the retail industry’s annual sales, Christmas 2010 should prove crucial in boosting recovery in the sector as Europe looks to strengthen its economic position in 2011. However, despite initial positive indicators earlier in the year, the growth prospects for most countries have worsened since June 2010, with growth moderating, inflation rising, consumer confidence falling, and evidence that consumers are curbing their spending – all factors expected to impact on European retail sales during the festive season.

According to the report issued today by Kelkoo, the online shopping comparison site, these recent setbacks are likely to have an impact on Christmas sales in 2010, with total European sales in this period[i] predicted to rise by just 0.8% (€2.4bn), compared to 1.8% (€5.4bn) between 2008 and 2009. However, with online spending continuing to thrive, internet retailing is expected to play a key role in propping up overall retail growth in Europe this Christmas, with year-on-year sales predicted to increase by 25% or €6.4bn on average. By comparison, offline sales are expected to perform poorly, falling by 1.4% or €4.1 billion against the previous year^[1].

Accounting for over a third (33.5%) of all consumer spending in Europe[ii], the retail sector is one of the most important contributors to the economy. The report, commissioned by Kelkoo and prepared by the Centre for Retail Research, assesses the sales forecasts for the European retail sector during the vitally important six week Christmas trading period. The study was conducted across nine European countries, and the data in the report is drawn from national statistical authorities, independent research organisations including Euromonitor and Mintel, and a survey of 50 large retailers across the UK, France, Germany, Denmark, Italy, Norway, The Netherlands, Spain and Sweden.

Richard Stables, CEO Kelkoo, comments: “The peak weeks of Christmas trading are critical for retailers, as many will earn up to 60% of their profits during this period. In addition, the retail sector is a major contributor to the European economy, employing almost 12.6 million people across 2.7 million retail stores and online businesses, and responsible for annual retail sales of €1,924 billion – 17.2% of GDP. The retail industry is seen by economists as a leading indicator of economic trends, and results this Christmas will prove vital in stimulating retail growth and aiding the European economic recovery as a whole.”

Christmas 2010 Spending Forecast

Total Christmas sales are expected to rise slightly this year to €313 billion, equivalent to 16% of annual retail sales in Europe, compared to €310 billion in 2009, and €305 billion in 2008. The UK, Germany and France are set to account for the highest total spend this festive season, with €77.2 billion, €64.5 billion, and €62.5 billion being spent respectively – representing 65% of European Christmas retail spending. Denmark, Norway and Sweden are predicted to spend the least overall at €5.4 billion, €6.1 billion and €9.6 billion. However, when Christmas spending is analysed as a proportion of national retail sales this year, it is UK consumers that are set to spend the most (18.25%), followed by the Germans (16.25%), the Swedish and the Italians (16%)^[1].

Retail spending has increased slowly throughout 2010 in most countries, and in some it has actually fallen in recent months. Of all the countries surveyed, the majority are set to see either a decline or a marginal increase in Christmas sales in comparison to 2009, with Denmark (-3.2%), Norway (-1.9%), Spain (-1.2%), and Italy (-0.5%) all set to experience a fall in overall Christmas spending. In contrast, retail spending in Sweden this Christmas is expected to rise by 4.3%, in Germany by 1.9%, by 1.3% in the UK and 1.0% in France ^[2].

(Source: CRR, INSEE, Eurostat)

The countries predicted to experience the strongest growth this Christmas (Sweden and Germany) have, according to IMF data on growth of GDP[iii], enjoyed positive and robust growth since Q2 2009, and have continued to grow strongly since then, which may account for the predicted increase in Christmas sales. Germany has also recently reported an increase in consumer confidence levels[iv], which is also likely to be a contributing factor. The UK, which is set to experience the third largest growth rate (1.3%), enjoyed a period of rapid growth in Q2 2010, and this, combined with the VAT rise to 20% on 4^th January 2011, is likely to stimulate spending this Christmas.

Although the economies in Denmark and Norway are generally considered to be doing relatively well at the moment, both are predicted to experience a drop in sales this Christmas. In the case of Denmark, this appears to be a continuation of a larger trend following sluggish performance in late 2009 and early this year, which saw retail sales volumes in Q2 2010 lower than those during the recession in 2009.  Similarly, Norway has experienced patchy growth during the last three quarters, and has seen a general reluctance amongst consumers to spend, resulting in flat retail growth since 2009. The predicted decrease in Christmas sales in Spain and Italy can be attributed to lower levels of consumer confidence and falling retail sales volumes in general, along with the overall contraction experienced by these economies until the end of 2009, and subsequent slow growth rates.

Online Outlook

Whereas total offline Christmas sales in Europe are projected to fall by 1.1% (€3.12bn) between 2008 and 2010, and by 1.4% (€4.1bn) since 2009, online Christmas sales are expected to rise by 51.4% (€10.9bn) from 2008 to 2010, and by 25.1% (€6.4bn) this Christmas alone, reinforcing the importance of online sales in driving retail sector growth^[2]. Online sales are expected to represent 10.3% (€32 billion) of total sales this Christmas, compared to 8.3% (€25.7bn) in 2009 and 6.9% (€21.2bn) in 2008 – equivalent to just over 10 cents for every Euro spent compared to just 7 cents in 2008^[3].

Online sales in the UK are forecast to be the highest of the nine European countries, both in terms of the total consumer spend (€13 billion) and as a percentage of total Christmas sales (16.8%). Consumers in Germany (€8.2bn) and France (€6.3bn) are the next highest spenders, and together with those in Norway (€0.73bn) and Denmark (€0.61bn) are expected to spend over 10% of their Christmas budget online. In contrast, consumers in Italy (1.5%), Spain (2%), Sweden (8.9%), and The Netherlands (9.1%) are predicted to spend the lowest share of their budget online^[3]. The countries that are expected to experience the strongest online retail growth this Christmas are The Netherlands (36.8%), France (30.7%), the UK (28.8%) and Spain (23.5%)^[2].

(Source: CRR)

Richard Stables concludes: “The retail outlook this Christmas is tepid, with trading conditions set to remain challenging in the months ahead. However, online spending is showing no signs of slowing down, and is mounting a real challenge to the dominance of the high street. Internet sales across Europe are set to be more important than ever this Christmas, with consumers spending record amounts online, and online commerce acting as the primary driving force for overall retail growth during the festive season.

“It is against this background that those retailers who are serious about enhancing their growth prospects have recognised the importance of establishing a strong online presence, as demonstrated by H&M, Gap, Banana Republic and Zara, who have all launched online sales portals within the last quarter. In the meantime, a climate of government cuts and economic uncertainty is likely to undermine consumer spending, meaning consumers are likely to remain as determined as ever to make sure they are getting the best prices, which explains why we expect to see many of them head online for their Christmas shopping.”

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[i] ‘Christmas’ for the purposes of the report is defined as the six-week period from mid-November to the end of the year.

[ii] Average % contribution the retail sector makes to GDP across the 9 European countries surveyed

[iii] OECD IMF 2010

[iv]. http://www.businessweek.com/ap/financialnews/D9IGP4P01.htm