Shopping Festival is Already Here

In Europe, Christmas markets and sales have kicked off and will continue until the first half of January 2024. As Christmas approaches, sellers eagerly rub their hands, hoping that in 2023, shoppers will be more willing to spend compared to the previous year when spending was quite reluctant.

Christmas markets are abundant across Europe – from Dublin to Warsaw and from Oslo to Rome. There are notably more shoppers compared to the previous year. In December 2022, two circumstances coincided, causing a cooling effect on the usual pre-Christmas shopping spree. Firstly, Europeans were hit by the shockwaves of last year's inflation surge. This year, although inflation hasn't been entirely overcome, people have almost grown accustomed to it. Secondly, regardless of the circumstances, Europeans were disturbed by the news from the eastern part of the continent, where Ukraine is facing its most significant war since WW2. For these two reasons, many Europeans decided to tighten their wallets year ago.

The 2022 sales season turned out to be one of the worst in the last 15 years. Surveys showed that in Germany, up to 20% of shoppers reduced their Christmas spending, in France, 40% of citizens decided to cut back on gifts, and in the UK, almost 75% of consumers froze their holiday expenses.

However, people missed the holidays and want to treat themselves again. For example, on Black Friday this year, global internet sales increased by more than 12%. In the US, they tripled.

What can you delight in for Christmas, and can you expect honest discounts?

Two answers. Yes, there is certainly something to delight in. No, discounts are never entirely honest. Although discounts happen.

Agreeing to Spend More

Consumer demand is gradually recovering, which is excellent for the economy. In Germany, retail sales for October increased by 1.1% compared to September, in Poland - by 3.2%, and in Sweden - by 1.4%.

Deloitte's report indicates that in 2023, the average holiday shopping bill will increase by 14% compared to 2022. According to Lupin Skelly, who oversees Deloitte's retail research department, most shoppers are willing to pay higher prices for Christmas goods.

PWC expects that nearly 40% of consumers will increase their Christmas budget. Including spending on trips during the holidays, which will increase by 12%. And this chart(see below) shows that residents of the UK, Germany, France, Italy, Spain, the Netherlands, and Belgium will spend the most money on gifts in 2023.

However, there are more modest forecasts. EY conducted a comprehensive survey in 28 countries, including the US, China, India, Brazil, Japan, and Germany. The result: people have become more careful about their spending. Therefore, about half of consumers plan to shop online to save money, and only 10% will go offline shopping to treat themselves and their loved ones. Also, the EY survey showed that 35% of Europeans plan to spend less during future holidays. In contrast, in China, 45% of citizens intend to increase spending. And this is against the backdrop of a deep economic chill in China.

PHOTO: Approximate total Christmas retail spending in Europe (online and in stores) in 2023 by country (in billions of pounds sterling, 1 pound= 1,16 eur right now, December 1). Source: The Gaze, Statista, Getty Images

Discount Hunting Season

The structure of the gift basket is also changing. Among purchases, cheaper items such as toys, souvenirs, clothing, and footwear prevail. Of course, expensive items like gadgets and jewelry haven't disappeared from this list. But, for example, consumers started buying portable and other electronics as gifts 25% less frequently since 2021. And only about every tenth consumer admires jewelry.

It's not surprising. Prices in the European Union continue to rise, although the pace of growth is slowing down. In October 2023, the inflation rate in the EU reached 3.6% year-on-year. In September, this indicator was 4.9%, and in August - 5.9%. In other words, things are improving.

Despite the fact that the energy crisis seems to be over, and energy prices fell by 11.2% in October, other goods still became more expensive. This includes items that have increased demand during the holiday season – clothing and footwear, electronics and household appliances, and alcohol.

A bright indicator of constant price increases is the iPhone, which, as before, remains one of the most desired Christmas gifts. But, it seems, in Europe, it has turned into a premium-class product. For example, the price difference between the new iPhone 15 Pro Max in the US and the EU exceeds 30%.

Since prices have been rising in recent months, sellers are less willing to offer discounts. And this is another reason why people have become more rational about their purchases. Small stores, which cannot afford to cut prices in half like large retailers sometimes, are not particularly pleasing with discounts. For some sellers, this is literally a survival issue.

Melissa Minkow, Director of Retail Strategy at the digital consulting company CI&T, explained that buyers were hoping for significant discounts in 2023. But these were "unrealistic expectations," according to her.

Market, Souvenirs, and Travels

Nevertheless, there's no need to spoil the festive mood. So, it's time to choose gifts for yourself and your loved ones.

In Germany, Christmas markets have been open since the end of November. Stuttgart, Baden-Baden, Hamburg, Munich, and Berlin are popular places where you can add to your collection of national souvenirs and indulge in local dishes like cabbage soup or goose liver. The main rule is to go to the market with cash in your pocket because craftsmen aren't very fond of credit cards. And when choosing a gift, it's worth avoiding products from China. Yes, unfortunately, sellers at markets don't hesitate to display budget copies from the Middle Kingdom as authentic souvenirs.

For those looking for portable electronics and various gadgets, it's worth checking out online store websites and marketplaces. For example, Amazon or eBay. Despite being an auction platform, the latter has many new items at tasty prices. Like retail chains, online sellers also actively participate in significant sales events. This includes "Black Friday" and "Cyber Monday," which have already passed. And, of course, the Christmas holidays.

If choosing electronics, you might notice that sellers offer not only ordinary smartphones and TVs but also a wide range of "smart" gadgets, as well as devices for saving energy and autonomous power sources. It's written right there: "To reduce electricity bills and smoothly endure blackouts." Buyers are offered charging stations with a function to replenish their capacity from the sun, energy-saving lamps that can be controlled via a smartphone app, as well as rechargeable robot vacuums and air purifiers. All to ensure that there's always light and comfort at home.

And, of course, the holidays will be even brighter and more unforgettable if you set out on a journey. Expensive? Are hotels trying to compensate for losses during COVID-19 lockdowns? Yes, that's a thing. But you can find discounts on tours, and they are delightful. Even now, you can find lucrative offers for trips with a 30-50% discount. And it's not just trips around Europe but also to exotic and warm countries, closer to the warm sea.