sas: analytics, artificial intelligence and data management ......3 top trading tips for retailers...

Christmas 2014: Adapting to Evolving Consumer Shopping Habits

November 2014

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ContentsTop Trading Tips for Retailers ...............................................................................................................................................................................3

Turning Santa’s Letters into Real Forecasting for Retailers ...............................................................................................................5SAS Perspective ................................................................................................................................................................................................................ 5

The Hot Issues ................................................................................................................................................................................................................... 6

Demand ..............................................................................................................................................................................................................................7Times Remain Challenging ............................................................................................................................................................................................ 7

Regional Differences ....................................................................................................................................................................................................... 7

Optimism Abounds Among the Young ....................................................................................................................................................................... 7

Chocolates and Playstations .......................................................................................................................................................................................... 7

Financial Wellbeing ......................................................................................................................................................................................................... 8

Interest Rates...................................................................................................................................................................................................................10

Top Gifts ...........................................................................................................................................................................................................................11

Pricing Promotions....................................................................................................................................................................................................13Christmas Discounting Losing its Impact ..................................................................................................................................................................13

The Lessons of 2013 ......................................................................................................................................................................................................13

Contradictory Messages ...............................................................................................................................................................................................13

Retailer Groupings .........................................................................................................................................................................................................14

Retailer and Consumer Views ......................................................................................................................................................................................14

Retailer Views on Promotions ......................................................................................................................................................................................15

Promotional Strategy and Stock Management ........................................................................................................................................................16

Competitive Response..................................................................................................................................................................................................17

Planning and Forecasting ....................................................................................................................................................................................19Retailers Face Anxious Wait for Christmas Demand Spike ....................................................................................................................................19

Weather Effects ..............................................................................................................................................................................................................19

Confidence in Forecasting High, but Predicting Demand Still Tricky ..................................................................................................................19

Timing of Christmas Purchasing..................................................................................................................................................................................20

When Purchases are Made ..........................................................................................................................................................................................22

Impact of the Weather ..................................................................................................................................................................................................23

Forecasting Demand .....................................................................................................................................................................................................26

Use of Data for Forecasting ..........................................................................................................................................................................................27

Forecasting Stock Levels ..............................................................................................................................................................................................28

Relationships with Suppliers ........................................................................................................................................................................................29

Fulfilment ........................................................................................................................................................................................................................31Consumer Expectations Rising ...................................................................................................................................................................................31

Click & Collect Poses Challenge for Retailers ...........................................................................................................................................................31

Online Gaining the Edge in Quest for Interesting Products ..................................................................................................................................31

Time of the Day Consumers Choose to Shop ..........................................................................................................................................................32

Retailer Views..................................................................................................................................................................................................................33

Retailer Response to Growing Expectations ............................................................................................................................................................34

Consumer Use of Online and Multichannel .............................................................................................................................................................35

Consumer Use of Stores and Online ..........................................................................................................................................................................36

Consumer Views on Delivery and Returns ................................................................................................................................................................37

Basic Methodology ..................................................................................................................................................................................................38SAS ......................................................................................................................................................................................................................................38Conlumino ......................................................................................................................................................................................................................38

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Dear Santa: What do consumers really want under their trees this Christmas?

By Andrew Fowkes, Head of Retail Centre of Excellence, SAS UK & Ireland

What wouldn’t retailers give for a sneaky peak at the millions of letters winging their way to Santa this festive season? Particularly in light of this SAS and Conlumino survey, which found that retailers are more optimistic about consumer spending this Christmas than consumers are themselves. So how can retailers get a better understanding of what consumers want, and deliver a very merry Christmas?

Fortunately there’s no need to steam open Santa’s post; consumers are writing their Christmas lists all year round. In the multi-channel environment, everything from sales transactions to browsing habits and social media posts are constantly giving retailers clues about what consumers want and how much they’ll spend. Retailers can combine this data with external sources – such as weather reports, economic data or competitor activity – and use SAS® Analytics to produce accurate forecasts and design effective seasonal promotions.

But, as this SAS and Conlumino report shows, it’s not just about knowing what consumers want; the rise of the omni-shopper means retailers need to forecast through whichever channel the consumers want to buy it – and even return it. We found that 55% of consumers intend to use click & collect services this Christmas, while half will compare prices and buy gifts online. And, 79% want the option of returning online purchase to a physical store. In the battle to keep everyone happy, retailers will need to constantly know where their stock is and where it needs to be to keep the Christmas shoppers happy.

The good news is that many retailers are taking positive steps to embrace customer data analytics. More than half (55%) constantly measure the impact of promotions on individual products, while 38% say their company often changes promotional strategies based on competitor activity.

However, the bulk of retailers are not using the year-round flow of available data to understand shoppers’ Christmas wishes and hone their forecasting. For example, 46.9% of retailers still use manual calculations to measure the impact of different factors on Christmas demand, while 44% use ‘‘gut feel” to forecast demand for new products. And, despite two thirds of consumers saying that year-round offers lessen the appeal of seasonal promotions, only 23% of retailers plan to reduce their investment in promotions this Christmas. Plus, just 14% of retailers use data from other companies – such as the weather – to help forecast demand accurately.

This all makes Christmas something of a lucky dip for retailers. Manual processes are slow and prone to human and error, and can only draw on insight from a limited number of data sources. This means forecasts cannot be quickly adapted to include new information as the season progresses – with obvious implications for supply chain management, pricing and promotions, fulfilment and customer satisfaction. So, it’s little surprise that 44% of retailers say their company would benefit from being able to automatically combine and analyse different data sources to measure demand in the run up to Christmas.

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Top Trading Tips for RetailersWhile carrying out the research, SAS and Conlumino have uncovered 10 tips for retailers to help ensure a way to meet the needs of customers without steaming open their letters to Santa.

Contingency Planning is KeyAs we saw with Christmas 2013, adverse weather conditions can throw even the best-laid Christmas plans into turmoil. With this in mind, it is critical to have a robust contin-gency plan in place. Key to this is working closely with suppliers to ensure that they are on the same wavelength and ready to respond quickly and in a coordinated fashion when problems arise.

Keep Consumers in the LoopSometimes delays or cancellations to orders are inevitable, particularly when unfore-seen events, such as extreme weather, come into play. What separates successful retailers from the less successful ones is how efficiently these problems are communi-cated to the consumer. One online grocery retailer managed to uphold its reputation for excellent customer service after its orders fell behind schedule in the testing weather conditions prior to Christmas 2013 by ensuring it sent out prompt notifications, complete with an apology. By contrast, one supermarket chain saw its Facebook page bombarded with complaints after some orders failed to turn up at all.

Be Transparent about Delivery and Cut-Off PointsHaving a transparent delivery and returns process, which sets the lead times of different options and is clear about how and when customers can return unwanted products, is crucial. With logistics providers operating at full capacity during this period, there is less room for manoeuvre and well-informed customers will have fewer reasons to complain if things do not go to plan.

Incorporate Weather Planning into ForecastsWhile the UK’s unpredictable weather continues to be the bane of many retailers in the run-up to Christmas, the technology is available to incorporate weather planning into forecasting procedures. One supermarket chain, for example, uses information supplied by the Met Office, enabling it to update its forecasts five days in advance. Such information is key to allowing the retailer to adjust stock and instore merchan-dising should a weather incident arise.

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Supply Chain VisibilityHaving a clear view of the supply chain is key to ensuring that retailers have the ability to react quickly to unforeseen changes in demand. If retailers are fully aware of where their stock is at all times and have an open line of communication with suppliers and logistics operators, then stock can more easily be rerouted to locations experiencing peak demand.

Learn from the PastOf course, the best way to plan for unexpected changes in demand or the weather is to learn from past experiences. Retailers should closely analyse incidents from past Christmas events, as these are likely to give the best indication of how demand will be affected should a similar event arise this Christmas.

Targeted PromotionsThe heavily promotional nature of the post-recessionary high street has led to a degree of promotion fatigue among consumers, tired of being bombarded with offers from every angle. What is clear, though, is that shoppers still appreciate a bargain, so to maximise the success of promotional activity, retailers must ensure that it is carefully targeted. The wealth of data available to retailers should enable them to personalise promotional offers to reach those consumers who are actually likely to take them up.

Mobile MarketingWith more and more consumers researching products and shopping on mobile devices than ever before, targeted mobile advertising is likely to be a valuable tool to differentiate retailers from their competitors this Christmas. Retailers should invest in mobile display, native and social advertising, along with location-based messaging which can be crucial to bringing nearby consumers into store, especially once the cut-off point for online orders has passed.

Social Media as a Forecasting ToolSocial media presents retailers with a wealth of information on consumer trends. During Christmas 2013, one department store showed how social media can form an integral part of a Christmas promotional campaign, but it should also be used to inform deci-sions on stock and ranging. An online fashion outlet, for example, uses real-time data sourced from blogs , social media sites, competitor websites and press mentions on a daily basis, which then assists buyers and merchandisers with their ranging and pricing decisions, helping to ensure product lines are trend led and up to the minute. Careful monitoring of data this way can give retailers a key advantage in the highly unpredict-able world of Christmas demand.

Smooth out the Customer JourneyWith shoppers researching and purchasing on more devices than ever before, it is critical that retailers both optimise their sales platform for each distinct channel and provide a seamless experience that tracks the user’s activity through each channel. This should allow consumers to complete each stage of their purchase through a different channel with as little disruption as possible.

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Turning Santa’s Letters into Real Forecasting for RetailersSAS PerspectiveAnswering everyone’s Christmas wish is actually relatively simple. The technology is easily available to turn consumer data into letters to Santa: transforming year-round hints into knowledge about the factors that will affect demand. Analytics from SAS enables retailers to quickly analyse all their data to produce accurate forecasts, design effective promotions, and gain an up-to-date view of the supply chain.

By automating analytics, retailers can:

• Better forecast demand and returns by channel, store location or even time of day, to aid availability and fulfilment

• Personalise promotions across channels to reduce consumers’ ‘promo fatigue’.

• For example, Social Location Mobile (SoLoMo) marketing would enable retailers to target consumers with SMS offers while they are in store – hopefully encouraging them to buy straight away rather than use the internet to shop around for deals

• Use consumer browsing habits to understand which products consumers might be waiting for the sales until purchasing. This is particularly pertinent as almost a third of our respondents resent buying gifts before Christmas when they know they will be reduced in the post-Christmas sales

• Quickly adapt or improve pricing and promotions in-line with changing factors, such as the weather, sales spikes, or competitor activity

• Move from ‘gut feel’ to accurate predictions about demand for new products.

Of course, analytics is not just for Christmas. While the festive season certainly focuses retailers’ need to understand consumers’ wish list, analytics can drive competitive advantage all year round. But, with sleigh bells ringing in the distance, time is of the essence to understand what gifts customers will want under their Christmas tree in 2014. If retailers get this right, it will be a merry Christmas for one and all.

SAS can help maximise stock coverage, minimise costs and improve forecast accuracy by analysing customers’ response to price, promotion, marketing and other activities. Price and promotions will affect demand more than any other single factor. Advanced analytics can help you understand each item’s relationship with other items in the category, and considers “cross-effects” when generating a demand forecast. To learn more about how SAS® Analytics is not just for Christmas: www.sas.com/en_us/industry/retail/retail-forecasting.html

Analytics from SAS, enables retailers to quickly analyse all their data to produce accurate forecasts, design effective promotions, and gain an up-to-date view of the supply chain.

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The Hot IssuesWith the recovery seemingly highly uneven on a regional level, consumers are still feeling the pinch. Early indications are that this Christmas is likely to have a similar feel to the promotion heavy 2013. While consumers are undoubtedly still seeking low prices, there is a sense of promotion-fatigue in the air. M-commerce is likely to continue its rapid growth story this Christmas and, with consumers increasingly shopping wherever and whenever they want, retailers are likely to face their toughest challenge yet when it comes to forecasting Christmas demand. With more and more consumers exploiting the opportunities presented to them by multichannel retailers, expectations of fulfilment are rising. Logistics operators continue to innovate to meet demand, while pureplays are increasingly weighing up the need for a physical presence.

DemandDespite the much-heralded economic recovery surging through Britain, many consumers, it seems, are still very much feeling the pinch. Just 18.3% of consumers feel better off finan-cially than at the same stage last year, while 29.8% feel worse off. As a result, almost a quarter (24.1%) are planning to cut back on spending this Christmas, while only about half that proportion (12.3%) are expecting to loosen the purse strings. For the majority, finances and spending remain relatively static as the wider macro-economic forces have yet to show any substantial positive impact on consumers’ pockets.

Pricing PromotionsOver two-thirds of consumers (67.5%) agree with the premise that Christmas discounting is losing its impact as retailers engage in increasing amounts of promo-tional activity throughout the year. Despite this obvious promotion fatigue, less than a quarter of the retailers we surveyed say that they expect their company to put less investment into promotions this year. Certainly it would be wrong to suggest that consumers are not still swayed by low prices, especially given that 56.6% admit to shopping around for the best deal once they’ve picked their presents.

Planning and ForecastingWith the spike in Christmas demand seemingly arriving later every year , it is perhaps not surprising that more than two-thirds of retailers think that consumers usually wait until the last two weeks before Christmas to do their Christmas shopping in the belief that that’s when the best deals are available. The rise of m-commerce is encouraging consumers to shop anywhere at any time, increasing the likelihood that there will be several demand spikes this Christmas, potentially making it the most unpredictable Christmas in history from a retail perspective.

FulfilmentConsumer expectations of retailer fulfilment capabilities are rising with each passing year as the top retailers continue to push the boundaries with advanced logistics networks. Almost two-thirds of the retailers we surveyed (and nearly three-quarters of large retailers) said that they felt consumers are increasingly demanding that they offer multichannel services such as click & collect. With 60.9% of consumers choosing to shop at a time of day when it is likely to be less busy, but only 15.1% actually taking time off work to do their Christmas shopping, retailers are increasingly under pressure to offer extended trading hours in the run-up to Christmas.

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DemandTimes Remain ChallengingDespite the much-heralded economic recovery surging through the UK, it seems that many consumers are still very much feeling the pinch. Just 18.3% of consumers feel better off financially than at the same stage last year, while 29.8% feel worse off. As a result, almost a quarter (24.1%) are planning to cut back on spending this Christmas, while only about half that proportion (12.3%) are expecting to loosen the purse strings. For the majority, finances and spending remain relatively static as the wider macro-economic forces have yet to show any substantial positive impact on consumers’ pockets.

Regional DifferencesThe picture is far from uniform across the UK, with some regions displaying a much more positive outlook than others when it comes to both finances and the prospect of consumer spending this Christmas. London consumers, for example, both feel better off than this time last year and plan to spend more this Christmas than those elsewhere who feel worse off and are planning to spend less, making London unique in the UK as the only region to post a positive net result in response to both questions. In fact, London is the only region in the UK where the proportion of consumers planning to spend more this Christmas exceeds those planning to spend less. The East Midlands has the most negative outlook on both fronts, while spending prospects also look bleak in Northern Ireland, the South East (excluding London) and the North East compared to 2013.

Optimism Abounds Among the YoungWith youth unemployment experiencing its largest fall in 2014 since records began, it is perhaps unsurprising that those in the 18−24 age bracket both feel better off financially and plan to spend more than in 2013. While the overall outlook for finances and spending is negative for both genders, female consumers are noticeably more downbeat than men. Those in the 45−54 age group appear to have experienced the biggest dip in their personal finances, while the outlook for spending is quite strongly negative for middle-aged consumers (those aged 35−54).

Chocolates and PlaystationsChocolates are the most popular gift item consumers are intending to purchase this Christmas, followed by typical entertainment products like books, music and DVDs. The toys category is dominated by next-generation consoles. Continuing to capitalise on last year’s animated film hits, character merchandise is the next most popular of all toys.

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Financial WellbeingRetailers show more optimism than consumersOn balance, the retailers we surveyed were more optimistic about the prospects of a consumer recovery in financial terms than the consumers themselves. Looking at the net result of those who say they feel better off financially than this time last year, minus those who feel worse off, consumers are very much in negative territory with a figure of -11.5%. While the views of retailers and consumers paint a largely similar picture, the net number for retailers’ views on consumer finances is significantly higher at +6.6%.

This translates into a more optimistic view of consumer spending from retailers than consumers, as again the net figure from the retailers we surveyed is in positive territory, while for consumers it remains negative. The majority of both retailers and consumers expect spending to remain about the same this year though. The economic recovery might be in full swing, but times remain challenging for consumers and retailers alike.

The Finances chart at the top shows how consumers feel in financial terms by comparison with Christmas 2013. The Spending chart shows whether consumers expect to spend more, less or about the same as Christmas 2013 and includes retailer expectations of consumer spending. All figures are percentages.

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More evidence of a London-centric recoveryOn a regional level, the proportion of people feeling worse off financially than this time last year exceeds the proportion whose finances have improved in every region, bar London and the West Midlands. The SAS and Conlumino research certainly adds weight to the notion of a London-centric recovery. In London, 7.3% feel significantly better off than they did last year, the highest of any region, while London is the only region where, on balance, consumers felt that their total spending is likely to be higher this Christmas than it was last time around. The East Midlands is the most strongly negative region with almost half (49.3%) of consumers feeling worse off than last year.

With youth unemployment experiencing its largest fall in 2014 since records began, it is perhaps unsurprising that those in the 18–24 age bracket both feel better off financially and are planning to spend more than last year. Female consumers appear to be feeling the financial strain, while those in the 45–54 age bracket are also feeling the pinch.

The Finances chart above shows how consumers feel in financial terms and the bottom charts show whether consumers expect to spend more, less or about the same by comparison with last Christmas. Numbers in the top chart refer to the net number of consumers who say they feel better off financially than they did last Christmas. The Spending chart above refers to the net number of consumers who expect to spend more this Christmas. The net number is calculated in the top charts by subtracting the number of consumers who say they feel worse off from those who say they feel better off and in the bottom charts by subtracting those who say they will spend less from those who say they will spend more.

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Interest RatesRetailers foresee negative impact of potential rates riseAs the economic recovery gathers pace, an interest-rates rise looks increasingly likely to be in the offing. Speculation about interest rates has been rife since the prospect was first mooted by governor of the Bank of England, Mark Carney, in early 2013. The spectre of rising interest rates is hanging over the nascent consumer recovery, threat-ening to squeeze household budgets with higher debts and mortgage repayments. The latest speculation suggests that a rise in interest rates may not occur before summer 2015, though, and the majority of both consumers and retailers believe that rates will remain the same between now and Christmas.

The growth in popularity of fixed-rate mortgages, together with a widespread delever-aging of private debt, is likely to soften the blow for consumers somewhat. Our survey suggests that retailers may be unduly worried about what impact a rates rise would be likely to have on consumer spending, with almost half of retailers (49.4%) stating that a rates rise would cause consumers to cut back. Less than half that proportion (21.3%) of consumers said the same. In fact, the vast majority – nearly three-quarters of consumers – said that a pre-Christmas interest-rates increase would have no effect on their Christmas spending.

The Interest Rates: predictions chart at the top shows what consumers and retailers expect to happen to interest rates between now and Christmas. The Interest Rates: effect on spending chart shows how consumers and retailers think a rise in interest rates would effect Christmas spending. All figures are percentages.

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Top GiftsIn our survey of consumers’ likely gift choices for 2014, inevitably toys (including next generation consoles) came out top of the list for most people.

At the time our survey was taken, in late September, a surprisingly high 32% of those who were planning to buy a toy had already made a decision as to what that was likely to be. The choices of those who already have a good idea of what they are going to buy, makes for some interesting reading. The top ten Christmas toys as selected by a landmark London toy shop featured strongly on UK shopping lists, with 48% choosing at least one item from that list; and as may be expected, the next generation consoles (which don’t feature in the top ten toys list) also make a strong showing with 44% including a console on their Christmas gift list.

Digging deeper, for the 35–54 year olds the consoles are the toy of choice for their children with 48% planning a purchase. The more traditional top ten toys are preferred by 18–35 year old toy buyers with 60% choosing gifts from this list, no doubt reflecting the age of their children.

Chocolates tie with toys, for womenBreakdown by genderRanking by percentage of respondents who said they are planning to buy each item as a Christmas gift this year.

Planned Gifts: Overall %

Toys (including consoles) 46.6

Chocolates 41.3

Books 33.2

Music and media, e.g. CDs, DVDs

30.2

Casual clothing 30.1

Bottle/box of wine 27.1

Gift card 25.1

Perfume/aftershave 22.4

Toiletries 22.1

Money 20.9

Box of biscuits 20.4

Planned Gifts: Male %



32.8

Chocolates 31.7

Books 31.0



Money 22.8

Gift card 21.9


Toiletries 16.6


Planned Gifts: Female %

Chocolates 48.8



Books 34.9


28.2

Gift card 27.7


Toiletries 26.4



Money 19.5

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Toys on top for familiesBreakdown by age groupRanking by percentage of respondents who said they are planning to buy each item as a Christmas gift this year.

Planned Gifts: 55+ year olds %

Chocolates 41.3

Books 36.8



Money 29.7


28.9


Gift card 26.1


Toiletries 22.4


Planned Gifts: 18–34 year olds %


Chocolates 37.2


Books 25.3


25.0


Toiletries 21.7


Gift card 18.8


Jewellery 14.6

Planned Gifts: 35–54 year olds %


Chocolates 46.0


38.0

Books 37.6


Gift card 31.4



Toiletries 22.3


Money 20.6

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Pricing PromotionsChristmas Discounting Losing its Impact?Over two-thirds of consumers (67.5%) agree with the premise that Christmas discounting is losing its impact as retailers engage in increasing amounts of promo-tional activity throughout the year. Despite this obvious promotion fatigue, less than a quarter of the retailers we surveyed say that they expect their company to put less investment into promotions this year. Certainly it would be wrong to suggest that consumers are not still swayed by low prices, especially given that 56.6% admit to shopping around for the best deal once they’ve picked their gift purchases. Some supermarkets have achieved notable success from a more transparent EDLP (Everyday Low Price) policy. Indeed, one supermarket’s price lock strategy is one of the factors underpinning its current status as the leader on price and value among the big four supermarkets – a vital strategic advantage in the current price war as the discounters continue to close in.

The Lessons of 2013Retailers would do well to learn the lessons from Christmas 2013, when an anxious wait for the spike in demand saw the high street engulfed in a flurry of feverish promotional activity. Contrast the performance of one promotion-focused department store, which began cutting prices as early as November 2013 and ended up issuing a profit warning on New Year’s Eve, after the final surge in sales failed to materialise, with that of another retailer, one of the festive season’s big winners in 2013, and it becomes clear that a promotion-led strategy influenced by competitor activity is not necessarily the best way to win over fickle festive consumers. The latter retailer held its nerve and steadfastly refused to budge on its strict policy of not discounting outside of sales periods. Not only does its policy ensure that customers’ expectations are managed, in as much as they do not hold off buying in the hope of a discount, it also ensures that, operationally, margins are maximised. This is one of the reasons why this retailer was a festive winner in terms of both sales and profits, with the latter at the very top end of market expectations.

Contradictory MessagesWhile almost half (46.7%) of retailers say that promotions on staple Christmas products and brands such as perfume sets and sprouts, cause consumers to buy more when compared with when these items are not on promotion, less than half that number (19.2%) said they thought that demand would be likely to fall this year for staple Christmas products that were on promotion last year, but won’t be this year. With 46.7% saying that their companies tend to invest in promotions on most of the same lines each year, it seems that some retailers may not fully grasp the impact these promotions are having on sales.

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Retailer Groupings

LARGE RETAILERS: Turnover: >£50m and/or Employees: >200

SMALL RETAILERS: Turnover: <£10m Employees: <50

MEDIUM RETAILERS:Turnover: <£50m and Employees: <200

Retailer and Consumer ViewsChristmas discounting may be losing its impactOver two-thirds (67.5%) of consumers feel that Christmas discounting is losing its impact as retailers are engaging in more and more promotional activity throughout the year. Consumers may be getting promotion fatigue, but they are still very much showing an appetite for seeking out the lowest prices. Over half (56.6%) shop around for the lowest price once they’ve picked their gifts and almost a third resent buying gifts before Christmas as they are always reduced in the sales.

Despite the apparent weariness of consumers towards promotions, less than a quarter (23.1%) of retailers are expecting to put less investment into promotional activity this year.

The net agreement refers to the total percentage of people who say that they agree with the statement minus the total percentage of those who say that they disagree.

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Retailer Views on PromotionsLarger companies see a bigger uplift on promotional itemsAlmost half (46.7%) of retailers say that promotions on staple Christmas products and brands, such as perfume sets or sprouts cause consumers to buy more when compared with when these items are not on promotion. Large retailers were more convinced of the impact of promotions on these products, with almost a fifth saying that promotions on Christmas staples lead to consumers buying significantly more, and the majority (63.7%) say that consumers tend to buy more than when these items are not on promotion.

It was a very different picture for smaller retailers (those with a turnover of less than £10m and fewer than 50 employees). Just 2.6% of small retailers say promotions on Christmas staples caused consumers to purchase more and, in fact, the same propor-tion actually said that consumers buy less. For almost half of these retailers, promotions on Christmas staples elicit very little change in demand.

The first of the two charts above entitled ‘Impact of promotions on Christmas staples’ shows the responses retailers gave when asked what effect promotions have on sales of staple Christmas products compared to when these items are not on promotion. The second chart shows the same data split by retailers in each size group. All figures are percentages.

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Promotional Strategy and Stock ManagementAre many retailers stuck in a rut?When it comes to promotional strategy, it seems that many retailers are stuck in some-thing of a rut: 46.7% say that their company tends to invest in promotional activity on the same lines every Christmas. With 47.4% of retailers building up their stock levels above initially forecasted demand, many are then left having to keep products on promotion regardless of performance in an effort to ensure the stock gets sold.

For a smaller, but still significant proportion (39.3%), lack of stock is more of an issue when demand for a product on promotion reaches unanticipated levels.


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Competitive ResponseLarger companies more influenced by competitors38.3% of retailers find themselves influenced to some degree by the kind of promo-tional activity their competitors are engaging in. Again, there are very significant differ-ences in terms of how differently sized retailers respond to the competition. In general, large retailers are the ones paying the most attention to competitor promotional activity. 60.6% of large retailers are influenced by competitor promotions, compared with 40.0% of medium-sized retailers and just 15.4% of small retailers.

The chart above entitled ‘Influence of competitor promotions’ shows the responses retailers gave when asked how influential competitor promotions are on their own company’s promotional activity. The second chart ‘Influence of competitor promotions by retailer size’ shows the same data split by retailers in each size group. All figures are percentages. NB. Where figures do not add up to 100%, the remainder is made up of “Don’t know” responses.

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Competitors are closely monitored55.4% of retailers constantly monitor competitor promotional activity, while a further 38.2% acknowledge that their company often changes promotional strategy based on competitor activity.

From an internal perspective, 54.8% of retailers constantly measure the impact of promotions on individual products, while 48.5% measure the impact of promotions by looking at the impact of similar promotions in recent years.


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Planning and ForecastingRetailers Face Anxious Wait for Christmas-Demand Spike With the spike in Christmas demand seemingly arriving later and later every year , it is perhaps not surprising that more than two-thirds of retailers think that consumers usually wait until the last two weeks before Christmas to do their Christmas shopping in the belief that that’s when the best deals are available. The rise of m-commerce is encouraging consumers to shop anywhere at any time, increasing the likelihood that there will be several demand spikes this Christmas, potentially making it the most unpredictable Christmas in history from a retail perspective.

Weather EffectsThe weather is another major concern for retailers in the run-up to Christmas, with 68.9% of large retailers saying that it has a medium-to-high influence on them as Christmas approaches. With many consumers leaving their Christmas shopping till the last minute, and online and multichannel operators promising later and later delivery cut-off points, even the best-laid plans can be derailed by a spell of bad weather. Christmas 2013 was a case in point. As consumers held out for those last-minute bargains, retailers were expecting a grandstand finish to the Christmas trade, only to see rain and high winds dampen footfall, with shopping centres in the worst-affected areas of the South East witnessing double-digit footfall declines. Online retailers strug-gled too, with one online grocer forced to issue an apology as its Christmas orders ran behind schedule, while one leading supermarket’s Facebook page was awash with complaints from consumers whose online orders had failed to turn up at all. Perhaps with the bad experiences of Christmas 2013 lingering in the memory, the retailers we surveyed consistently rated the influence of the weather on consumer shopping habits higher than the consumers themselves did.

Confidence in Forecasting High, but Predicting Demand Still TrickyGiven the unpredictable nature of consumer demand in the run-up to Christmas, it is perhaps unsurprising that 46.1% say that, irrespective of the strength of their company’s forecasting, they still find it to difficult to anticipate how demand will develop as Christmas approaches. Almost half (49%) of retailers said that there is a high level of confidence in their company’s Christmas forecasting, compared to only 11.3% that said otherwise. Despite this, 44.1% said that forecasting for new products can often rely on little more than “gut feel”, while a similar proportion (44.3%) felt that their company would benefit from a means to automatically combine different data sources to measure demand in the run-up to Christmas. For 46.9% of retailers, the process of reviewing the impact of the different factors which affect Christmas demand is still an exercise in manual calculation.

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Timing of Christmas PurchasingMany consumers wait until the last two weeks

The charts above show the level of agreement and disagreement with various statements about Christmas shopping. All figures are percentages.

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Cyber Monday becoming more ingrained in the cycleConsumers: Timing of Christmas purchases

Despite 40.9% of consumers waiting until the last two weeks before Christmas to take advantage of the best deals, fewer than one in ten profess to putting off Christmas gift purchases altogether in order to take advantage of the January sales. Retailers certainly seem accustomed to consumers putting off Christmas purchases to the last minute, with 66.8% saying that consumers tend to wait till the last two weeks before Christmas to get the best deals, and 60.4% stating that consumers will typically do the bulk of their shopping on the weekend before Christmas, regardless of which day it falls on.

For over a fifth of consumers, the fact that Christmas falls on a Thursday this year has made them more inclined to shop online rather than visit physical stores.

16.2% of consumers are already thinking that they will be purchasing gifts online on Cyber Monday. With some retailers offering huge sales, Monday 1st December is set to be a big day in any bargain hunter’s diary. In 2013, one major online retailer announced that Cyber Monday was its busiest day of sales ever in the UK.

The chart above shows the level of agreement and disagreement with various statements on Christmas shopping. All figures are percentages.

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When Purchases are MadeChristmas shopping in the 11 weeks to ChristmasWhile seasonal and partywear see a more gradual shopping trend across the festive season, gifts enjoy the highest level of interest of all the categories throughout the lead-up to Christmas. So it is worth beginning gift promotions as early as October. As can be seen, few people do much food shopping for Christmas before the start of December. The final week before the big day marks a drastic spike of shopping as people seek to purchase food as fresh as possible.

The chart above shows the percentage of consumers who had completed their shopping in each category during these seven-day periods in the run-up to Christmas 2013.

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Impact of the WeatherThe weather has a greater influence over retailersWhile only 16.3% of consumers concede that the weather has some influence over the type of Christmas presents they buy, it can be very significant for retailers. Almost half, 49.5%, say that the weather has some influence on their company in the run-up to Christmas.

The chart above on the influence of weather on retailers shows the responses retailers gave when asked: How much influence does the weather have on your company in the run-up to Christmas? The second chart looking at the influence of weather on consumers shows the responses consumers gave when asked: How much influence does the weather have on what Christmas presents you buy other people, particularly when buying products such as clothing (e.g. a snuggie) and gardening tools? All figures are percentages. NB. Where figures do not add up to 100%, the remainder is made up of “Don’t know” responses.

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Larger retailers more affected by the weatherIt seems the bigger the retailer, the more influence the weather has on pre-Christmas plans. While only 28.2% of small retailers say that the weather is influential in the run-up to Christmas, that figure rises to 46.7% among medium-sized retailers and to over two-thirds (68.9%) of large retailers. In fact, over a quarter of large retailers (25.8%) are heavily influenced by the weather in the run-up to Christmas.

The chart above shows the level of influence the weather has on small, medium and large retailers in the run-up to Christmas. NB. Where figures do not add up to 100%, the remainder is made up of “Don’t know” responses.

The chart on the left shows the level of agreement and disagreement with various statements on Christmas shopping. All figures are percentages.

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Shoppers typically delay trips because of the weather

The chart above shows the level of agreement and disagreement with various statements on Christmas shopping. All figures are percentages.

Around a third use the same locations whatever the weatherOver a third of consumers (35.9%) put their Christmas shopping trip on hold during periods of bad weather, while 39.5% choose to shop online rather than head outside. The retailers we surveyed have seen an even more pronounced effect from the weather, with almost two-thirds (64.1%) finding that consumers tend to delay their shopping trips due to the weather, while 63.5% feel that consumers tend to look to the internet for their Christmas shopping fix when the weather takes a turn for the worse.

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Forecasting DemandRetailers still find it difficult to predict consumer demandThe unpredictability of consumer demand is a major issue for retailers in the run-up to Christmas. 46.1% say that irrespective of the strength of their company’s forecasting, they still find it difficult to anticipate how demand will develop as Christmas approaches. Although 46.7% say that their company is able to react quickly to sudden fluctuations in demand, a substantial 36.4% say that their company can struggle if demand does not match up with what has been forecasted. Almost two-thirds (61.7%) agree that planning for the unexpected is crucial.


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Use of Data for ForecastingExternal data sources most popularOver a third of retailers employ external retail, consumer and economic data as part of their forecasting process (including 80% of medium-sized retailers), making it the most popular data source for forecasting demand.

Despite almost half of retailers saying that the weather has at least some influence over the company in the run-up to Christmas, just 14.4% of retailers use data from other companies that provide forecasts on relevant factors such as the weather. This is consid-erably more popular among large retailers though, with 25.8% acknowledging that they use this kind of source. This is arguably more relevant to companies with a large store estate and/or a larger amount of stock to coordinate.

The chart above shows what percentage of retailers use each data source when forecasting demand, split by retailers of different size. NB. Where figures add up to less than 100%, the remainder is made up of “Don’t know” responses. Retailers were able to select more than one response, so figures may add up to more than 100%.

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Forecasting Stock LevelsForecasting for new products often relies on “gut feel”Almost half (49.0%) of retailers we surveyed said that there is a high level of confidence in their company’s Christmas forecasting compared with only 11.3% that said otherwise. Despite this, 44.1% said that forecasting new products can often rely on little more than “gut feel”, while a similar proportion, 44.3%, felt that their company would benefit from a means to automatically combine different data sources to measure demand in the run-up to Christmas. For 46.9% of retailers, the process of reviewing the impact of the different factors which affect Christmas demand is still an exercise in manual calculation.


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Relationships with SuppliersSuppliers generally deemed helpfulWith suppliers forming a key part of the process of planning for Christmas, it is positive that 39.4% of retailer respondents described them as either helpful or very helpful when it comes to pre-Christmas strategies, while just 2.8% view them as unhelpful, and a tiny minority (0.6%) have very unhelpful suppliers.

The chart above shows the responses retailers gave when asked how helpful their suppliers are when it comes to pre-Christmas strategies. All figures are percentages. NB. Where figures do not add up to 100%, the remainder is made up of “Don’t know” responses.

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Suppliers are key to pre-Christmas strategiesJust under half (48.6%) of retailers meet with suppliers to collaborate on the best ways of responding to consumer demand. Opinion is split though on the utility of such meetings, with an equal proportion of 24.8% both disagreeing and agreeing that too much time is wasted in such meetings. 39.7% have also known suppliers to make commitments around stock that they end up not being able to fulfil, while almost a third (30%) feel that suppliers sometimes prioritise rival retailers in the run-up to Christmas.


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FulfilmentConsumer Expectations RisingConsumer expectations of retailer fulfilment capabilities are rising with each passing year as the top retailers continue to push the boundaries with advanced logistics networks. Almost two-thirds of the retailers we surveyed (and nearly three-quarters of large retailers) said that they felt consumers are increasingly demanding that they offer multichannel services such as click & collect. With 60.9% of consumers choosing to shop at a time of day when it is likely to be less busy, but only 15.1% actually taking time off work to do their Christmas shopping, retailers are increasingly under pressure to offer extended trading hours in the run-up to Christmas. In response to this, the majority (59.4%) of retailers offer longer opening hours for Christmas shopping, with this figure rising to 72.4% among large retailers.

Click & Collect Poses Challenge for RetailersThe exponential growth in click & collect poses a significant challenge for retailers. Almost as many consumers, 55.4%, intend to use click & collect services this Christmas as intend to buy gifts online. Reserve and collect is another very popular method of fulfilment, while a substantial 14.1% of consumers are planning to use dedicated collec-tion points. Faced with coordinating online home and store deliveries, the increasing complexity of the supply chain is causing many retailers a number of problems. One such problem lies in freeing up space in smaller stores, particularly as consumers are gaining confidence when it comes to online purchases and are increasingly willing to order larger items online.

Online Gaining the Edge in Quest for Interesting ProductsOver half of consumers (54.7%) agree that online is the best place to find unusual and interesting products, and 48.9% think that the best Christmas bargains are found online. Despite the obvious popularity of online services, 53.2% of consumers still say that they like to actually see a physical product before buying it as a gift. Views on the importance of talking to store staff about products are more mixed though, with 27.9% preferring to visit a store to ask about the products they are buying compared with 28.8% who do not.

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Time of the Day Consumers Choose to ShopLonger trading hours changing shopping habitsThough only about 15.1% of consumers take time off work to go Christmas shopping, the majority (60.9%) choose to shop at a time of day when the shops are less busy; a fact which, according to 61.3% of retailers we surveyed, owes much to the rise of extended trading hours. In fact, 38.3% of consumers actively choose retailers that offer longer opening hours.


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Retailer ViewsConsumers increasingly demand multichannel servicesWith click & collect continuing to grow in popularity, more and more consumers are expecting retailers to offer it. Almost two-thirds of the retailers we surveyed (nearly three- quarters of large retailers) said that they felt consumers are increasingly demanding that they offer multichannel services such as click & collect.

The impact of click & collect appears to be mixed though, with over half of large retailers saying it has a negative impact on their company’s smaller stores, while less than a fifth say it is an effective driver of footfall. It is a different story among small companies where a substantial 40% see it as an effective footfall driver.

The chart above shows the responses retailers gave when asked: When it comes to buy and collect services, which of these statements apply to your company? The results are also split out for retailers of different sizes. All figures are percentages.

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Retailer Response to Growing ExpectationsNearly 60% of retailers offer longer trading hours

The chart above shows what percentage of retailers offer each fulfilment service, split by retailers of different sizes.

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Consumer Use of Online and MultichannelOver half of consumers planning to use click & collectOver half of consumers (55.7%) say they are likely to purchase gifts online this Christmas, while 49.5% are likely to use the internet as a means of comparing prices across different retailers, and 44.1% expect to use it as a source of inspiration and ideas.

Alongside the rise of online is, of course, the ongoing development of click & collect services as the advantage in the battle for multichannel supremacy swings back in favour of those with a physical presence. Almost as many consumers, 55.4%, intend to use click & collect services this Christmas as intend to buy gifts online. Reserve and collect is another very popular method of fulfilment, while a substantial 14.1% of consumers are planning to use dedicated collection points.

The chart above on likely online activities during Christmas shop shows the percentage of consumers who said they were likely to do each activity online this Christmas. The second chart on multichannel services shows the percentage of consumers who said they were likely to use each multichannel service this Christmas.

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Consumer Use of Stores and OnlineMajority of consumers still like to see physical productOver half of consumers (54.7%) agree that online is the best place to find unusual and interesting products, and 48.9% think that the best Christmas bargains are found online.

Despite the obvious popularity of online services, 53.2% of consumers still say that they like to actually see a physical product before buying it as a gift. Views on the importance of talking to store staff about the products are more mixed though, with 27.9% prefer-ring to visit a store to ask about the products they are buying compared with 28.8% who do not.


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Consumer Views on Delivery and ReturnsPrice is key when consumers choose delivery optionsWith online and multichannel operators offering later and later cut-off points for delivery, 63.3% of consumers admit to being concerned that orders made near Christmas won’t arrive on time.

In spite of this, just 20.2% would be prepared to pay extra for same-day delivery and for 57.7%, delivery price is the most important consideration when choosing their online delivery method. The importance of interlinking online and instore services is under-lined by the fact that almost three-quarters (73.8%) of consumers say that returns should be allowed instore for unwanted Christmas purchases made online.

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Basic MethodologyFindings in this paper are drawn from two separate surveys: one surveying UK retailers and another surveying UK consumers. These surveys were designed to ask both retailers and consumers a comprehensive range of questions on anticipated demand this Christmas, as well as more specific topics such as fulfilment of Christmas orders, forecasting of Christmas demand, and how pricing and promotions impact demand in the run-up to Christmas.

In total, Conlumino interviewed a representative sample of 1,000 UK consumers, and a cross-sample of 155 UK retailers.

SASThis study was commissioned by SAS UK & Ireland, the leader in business analytics software and services and the largest independent vendor in the business intelligence market. Through innovative solutions, SAS helps customers at more than 70,000 sites improve performance and deliver value by making better decisions faster. Since 1976 SAS has been giving customers around the world THE POWER TO KNOW®.

ConluminoConlumino is a retail research agency and consulting firm. Its work focuses on all aspects of retailing and consumer behaviour, which is delivered through bespoke reports, projects and presentations, and its leading edge Intelligence Centre platform. Conlumino works with many of the world’s leading retailers, property firms and those in the financial sector to help them maximize success through developing a thorough understanding of the sector and its likely future performance.

This publication was produced by Conlumino on behalf of SAS UK & Ireland© 2014 Reserved, SAS UK & Ireland

All rights reserved. No part of this material protected by this copyright may be reproduced or utilised in any form, or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system without prior authorisation and credit to SAS UK & Ireland.

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SAS and all other SAS Institute Inc. product or service names are registered trademarks or trademarks of SAS Institute Inc. in the USA and other countries. ® indicates USA registration. Other brand and product names are trademarks of their respective companies. Copyright © 2014, SAS Institute Inc. All rights reserved. 1033839UK1014

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