According to the latest data from the Office of National Statistics (ONS), the UK has finally climbed out of recession, showing a GDP growth of 0.1% in the last three months of 2009. And although this growth is minor, there is hope that a corner has been turned.
All of the economic fluctuation has had a crippling effect on consumer spending with many fearing that the Christmas retail season in 2009, encompassing the December and January periods, would bear the brunt of the penny pinching.
However, this seems not to have been the case as retailers across Europe have reported an increase in Christmas spending, which in some cases was markedly above that of 2008. Examples of this in the UK alone are Boots, Waitrose, Tesco and House of Fraser, with C&T sales putting in a good performance. And what is even more encouraging is that the boom seems to have seeped into the January sales period too, with sales for January 2010 reaching an all time high, according to industry retail analysts BDO Stoy Hayward.
Sales smelling sweet
The Perfume Shop, which has 179 stores across the UK and Ireland, is a prime example of a retailer that has started to return to form. The A.S. Watson-owned company has enjoyed a particularly successful festive season, seeing combined UK and Ireland sales increase by 8.5% for the five weeks ending 2 January 2010. Even more impressive is the retailer’s online business, which saw a staggering 162% rise on the same period.
Matthew Walburn, head of marketing for The Perfume Shop, feels that the retailer has learned a lot from a disappointing 2008 Christmas period. “It goes without saying that Christmas is an absolutely vital time for C&T retailers, especially for fragrance retailers such as ourselves as approximately one third of all perfume and aftershave sales are made at Christmas.
“We had a satisfactory Christmas 2008 but we learned a lot from that experience and really upped our game in 2009. We focused much more on buying in bulk and thinking big.
“I believe we saw an increase in sales because we offered customers more of what they wanted. If we can offer them a 200ml scent for the price of a 100ml scent, they are much more likely to part with their money. We also focused much more on our retail experience and made the most of our staff, who have always been our biggest asset.”
He adds that The Perfume Shop really invested in its online arm over 2009 and the growth of 162% was a welcome, if not unexpected, turn of events. “The poor weather over the Christmas period definitely contributed to customers not being able to get into the stores and people enjoy shopping online in the comfort of their own home more than ever nowadays,” says Walburn.
He says that after such a satisfactory period, which was replicated by A.S. Watson across its other European chains including Marionnaud and ICI Paris XL, The Perfume Shop has a “bullish” attitude towards the coming season.
“With such a promising 2009 behind us, we have confidence for 2010. We aim to keep our strategy simple and straightforward and we will continue to focus on volume and great service.”
Promotional drive
Part of the reason that The Perfume Shop had such a fruitful period was its increased advertising presence in the run up to Christmas. Television advertising was significantly stepped up as the brand promoted its wares in the commercial breaks of popular television programmes such as the
X Factor and Coronation Street. Mike Ramseyer, ceo of mymarketmonitor.com, says that although its research shows that advertising and editorial coverage for the Christmas period was down in 2009, C&T sales were up in many cases as consumers decided to treat themselves.
He comments: “Christmas 2009 was a positive sales story and research suggests that consumers were fed up with the recession and decided to indulge themselves with a festive beauty treat. Unfortunately as the credit card statements have hit the mat, the market will have inevitably started to retreat.”
There was also a small uplift in the number of fragrance brands that ran press advertising although overall promotional fragrance spend was down by 7.5%, to the tune of £1m.
Prestige fragrance and cosmetics distributor Aspects Beauty, which distributes to premium retailers like Selfridges and Harvey Nichols, has also had a far better year than expected, according to its managing director, Jill Hill. She says that consumers seemed to spread their retail purchases over a longer period during Christmas 2009 which had implications with customers ordering stock.
“Lots of stores ran discount spectaculars in the four weeks running up to Christmas in order to boost sales and this helped things enormously, especially where fragrance was concerned. Because of the rush, some stores were very late in placing their orders with us which left us delivering stock very late on to some clients.”
Caution advised
Hill says that the January sales period has been a lot stronger than expected, which is encouraging as February is traditionally a difficult trading month.
“I would say, however, that there is too much reliance on December and January sales,” says Hill “and it is becoming much more of a make or break time for retailers, which puts too much pressure on them. This heavy discounting before Christmas may work in the short term but only serves to reduce retail margins in the long term which is no good thing. Growth at any cost is not necessarily growth.”
However, its retailers’ decisions have not had an adverse effect on Aspects Beauty’s fortunes with Hill saying that, excluding new business, the company saw a 28% sales growth in 2009 on a like-for-like basis. This is something she is understandably keen to replicate in 2010 and plans are already well underway for this year.
“Our aim for the first half of this year is to make sure all new launches are well grounded so that when we come to the Christmas period this year consumers have more options,” comments Hill. “March and September are traditionally good times for fragrance launches and we need to make sure that these are effective, as this will provide a buffer to take the pressure off Christmas retail.”
Across the channel
It seems that retailers on the continent are experiencing the same turnaround in sales as they go into 2010, with renewed verve after a surprisingly buoyant Christmas.
German department store Karstadt, despite threats of it going into administration, has recently reported in German newspaper Handelsblatt that its Christmas period was “much better than could have been expected” and the high frequency of consumers in its 133 stores across the country has given it renewed hope for the future.
Rossmann also saw good growth over Christmas with Michael Naujock, international marketing and procurement manager for the drugstore chain, commenting: “Our C&T sales were up 15% in November and a further 8% in December. Most of our C&T categories were unaffected by the financial troubles, although fragrance sales did see a slight dip. It is difficult to predict what 2010 will have in store but we remain confident after a successful 2009.”
Although German perfumery chain Douglas, which operates throughout Europe, does not publish its Christmas trading results until the end of this month, it will say that it made a “respectable” start to 2010 with consolidated sales up 2.3% on the previous year, totalling t3.2bn. Its sales in Germany were up by 1.1% although other areas were not so fortunate as they dropped by up to 0.8%. Douglas says 2010 will see 40 new stores opening across Europe where the focus will lie with Italy and Poland in particular.
Perfumery chain Beauty Success, which has 246 retail outlets in France, is the country’s number one perfumery chain. President of the group, Phillipe Georges, comments: “Beauty Success ended December with a 10% growth compared to the market average of 0.9%. We usually take 22% of our yearly sales during the month of December so Christmas is a key retail period for us. The results we achieved were certainly better than we expected but this was compared with December 2008, where our sales were definitely disappointing. We are now hoping that Mother’s Day, which is the second best sales period for us after Christmas, will also be a money spinner for us.”
Italian retailer La Rinascente has also had a fortuitous Christmas, as events manager Rossana Gatti, explains. “For Christmas 2009 we approached things in a different way than we did in the previous year and this seemed to have the right effect. For 2010 we are planning important changes to our store layout and improving our service offering all round. We are excited to see what 2010 will bring.”
Despite 2009 being a year of trials and tribulations for consumers, retailers across Europe seemed to have ended the year on a high note.
Few people in the industry could have predicted that Christmas 2009 would see such spending or that January its annual sales season so heavily embraced. This hike in profits must have acted as the shot in the arm for retailers across Europe who have gone into 2010 with increased gusto and enthusiasm. And if the recession really has run its course, the future looks brighter still.
Chain profits from discerning consumers
' The beginning of December was not very busy and we were getting slightly concerned, but then things really picked up. We did not have high expectations due to the financial crisis but we were very pleasantly surprised with the outcome.
At Sahling Best of Beauty we sell premium products and we have benefited from our consumers looking for quality over quantity when it comes to beauty purchasing. So in a strange way the situation the economy has created has been beneficial to us.
We did not enjoy the same success in January however as this has been a quiet time for us. This has not given us cause for concern though as this is always the case for us in the new year and we saw such a healthy growth over Christmas it made up for any new year deficit.
The most important strategy we have for 2010 is that we will do our best to get new cosmetic and fragrance launches into our stores to attract the ever discerning German consumer who always wants new things. We have a new store opening in Hamburg next month which is a big venture for us so we are looking forward to that. But on the whole, the C&T market looks to have turned a corner and this is something we should all be grateful for. '