It’s beginning to look a lot like Christmas:

There has been plenty of recent narrative casting doubt over the buoyancy or otherwise of Christmas this year for retailers. This type of discourse has occurred around Christmas throughout living memory, although this time round the doomsayers have more than a slight point to play with in terms of the perfect storm that is engulfing the retail sector.

The cost-of-living crisis is very real, with households feeling the sharp impact of rising food bills, accelerating utility costs and the unwelcome fact that their wages are failing to keep pace with inflation. It is therefore inevitable that many households will be looking to trim their budgets for the festive season.But recent research from Spark Emotions indicates that this cost-cutting might not be as severe as many had feared.According to a November poll, 26% of Brits have ‘high concerns’ about the cost of Christmas, but this is fewer than the 46% in May.

Shoppers are prioritising gifts for children and the Christmas lunch while looking to cut costs in other, more discretionary, areas like gifts for extended families and Christmas decorations.

As we’ve previously highlighted, there have been other exogenous factors that are hampering supermarkets’ preparation for that biggest trading period, not least the legislation around HFSS and the timing of the World Cup. There are arguably just too many moving parts for supermarkets.

With this in mind, it has been noteworthy that shopper marketing around the World Cup has been very muted. The big retailers have gone for modest activities around beer as well as ensuring that their point of sale material is a hybrid of Christmas and football. Aside from some vague attempts to link their products to football from the likes of Warburtons, the only real branded activation has come from official FIFA Partners Coca-Cola and Budweiser.

A valid observation would be that most brands have decided they’ve got enough to be dealing with amid Christmas without throwing the World Cup into the mix, while many others may have been discouraged from participating in football-related activity due to the unfavourable ethical undertones of the tournament being hosted in Qatar.

Value for money is clearly top of mind for shoppers now and it has been interesting to see how retailers have been positioning themselves as being able to deliver optimal value for their customers. Both Tesco and Asda have showcased their value credentials through offering the concept of Christmas lunch for £25 and £20 respectively and by encouraging customers to shop the frozen category.

Loyalty mechanics are very much to the fore too. Tesco’s game-changing Clubcard Prices activity continues at full speed ahead, with Asda, Morrisons and Sainsbury’s also joining the fray.

We’ve been spending lots of time in stores recently and one thing that has really shone through is the increasingly collaborative relationship between major manufacturers and the discounters. While the bulk of attention is focused on Aldi and Lidl where, to be fair, a lot of suppliers seem to be landing some interesting shopper marketing, the likes of Home Bargains and B&M are also putting on an increasingly impressive seasonal proposition thanks to exclusive products, bespoke displays and merchandising initiatives from big brands. B&M in particular is awesome at seasonal retailing, so it’s no great surprise to see some of the big suppliers getting on-board.

While Christmas will undoubtedly happen from a shopper perspective, it will be fascinating to see the size and scope of the festive hangover in terms of unsold stock. While food and drink will no doubt see their usual seasonal boom, there are genuine fears among the big supermarkets that discretionary items, like health & beauty gifting and toys, might not see the sort of sales volumes that retailers would hope for. Entering 2023, a year that is going to be beset by logistical, economic and behavioural challenges for retailers is going to be hard enough anyway without starting out with mountains of unsold stock that needs clearing.

There will of course be the usual health-focused marketing campaigns in January, but with many households under significant economic pressure, the big supermarkets are going to find it harder than ever to turn a decent profit, especially as their own costs are showing no signs of decelerating.

One approach could be relentlessly hacking away at costs, but hopefully 2023 will instead be a year of innovation and collaboration.