For many retailers, Christmas is the busiest and most profitable period of the year. However, in times of economic downturn, consumers look to celebrate the festivities in a more frugal manner, often spending far less on gifts, food and booze than they would in more prosperous times. Inevitably, this can have an impact on how lucrative the festive season is for businesses.
This trend has already been observed in 2022, when YouGov data found that more than half of Britons (55%) planned on spending less on festivities due to the rising cost of living. And, with the situation very much the same – if not worse – we’re most likely going to see this trend mimicked in 2023.
The bad news is that this will disproportionately impact small businesses as consumers prioritise price over uniqueness and quality (which is where small businesses tend to have the edge over large corporations like Amazon). However, there are certain strategies business owners can employ to try and get around these obstacles.
In this article, we’ll discuss the expected economic trends this Christmas in light of the cost of living crisis and offer advice on how to combat them in order to still have a profitable year.
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How the Christmas cost-of-living crisis will affect consumer trends
The following statistics illustrate the money-saving tactics and plans consumers embarked on in 2022. However, with things being much the same economically, we can assume the below stats apply equally to this year’s festive season trends.
Young people will be most affected
Consumer Intelligence reveals that younger people, aged between 18-34 year olds, are most adversely affected by the cost-of-living crisis and will spend far less compared to those aged 65+. If your business targets this young demographic, you may be most hard hit by the economic downturn.
Fewer festive events
Social events and parties are also going to see a dip this year, with some 22% saying they would both attend and host fewer parties in order to save money. A further 31% admitted they were planning on cutting back on new party clothes as well – affecting retail. Additionally, festive-themed days out and visits to Christmas attractions are off the table for 25% of Britons – with 1-in-10 even avoiding a visit to Father Christmas to save money.
Christmas is traditionally a time to take road trips and travel up and down the country to see relatives. However, this year we’re likely going to see far less of that, with 20% of people planning on travelling less and staying at home to save money.
Fewer gifts and festive decorations
Gift giving it seems is the first to take a hit during times of economic difficulty, with [43%]((https://www.consumerintelligence.com/articles/cost-of-living-crisis-hits-christmas) planning on cutting down on presents. Homes are also going to look significantly less festive, with nearly a quarter of people holding back on decorations, and a fifth on Christmas lights – not least because of soaring energy prices.
Decrease in food and drink spending
Finally, the hospitality industry is also going to be hit hard, with 38% stating they will spend less on eating out and a whole other 30% admitting they’ll be spending less on food overall – and 25% less on Christmas beverages.
How to still see a profit this Christmas despite the cost-of-living crisis
With consumers spending less over the festive season, businesses need to find ways to still draw in customers and maximise every sale. Below are some of our top tips for achieving this.
Accept a wide range of payment methods
Customers may choose to shop elsewhere if a store doesn’t accept payments by their preferred method. To avoid potentially losing customers this way and maintain a healthy cash flow, make sure you have the capability to accept multiple payment types. With Square POS you can accept multiple popular payment types, including contactless and mobile wallets.
Stay ahead of stockouts
If an item is fast selling, you don’t want to miss out on sales by running out of stock before you can meet customer demand. Square for Retail has inbuilt inventory management allowing you to automatically reorder items and receive alerts when stock levels are low.
Sell in-store and online
With many shoppers going online to make their Christmas purchases, not offering your products for order via your website or social media means you may be missing out on a large volume of sales. With Square Online you can easily set up your e-commerce store and reach customers virtually. Your online store will also work seamlessly on mobile and has options for buying and selling through social media channels.
Streamline payment processing, menu management, and online ordering as a hospitality business
If you’re running a restaurant or food establishment, clunky, inefficient software is going to cost you custom. Opt for software like Square for Restaurants that seamlessly connects front and back houses, provides easy menu management, stock tracking, order tracking and seamless payments, allowing you to offer smooth service and keep customers satisfied.
Make sure your marketing is on point
Another essential element to optimising sales during the cost of living crisis this Christmas is creating an effective marketing strategy that can reach a maximum number of customers. This can come in multiple forms, including email marketing detailing your festive products and offers, social media campaigns that highlight your items and even old-fashioned posters and flyers in-store. Square offers Email Marketing that allows you to design custom emails, set up automated campaigns and see how your marketing efforts affect your bottom line – all directly from your Square Dashboard.
Promote customer loyalty
Return customers provide lifetime value for businesses, and are also less costly to retain than to attract new customers. It therefore pays off to value your loyal customers. Consider building a customer loyalty programme that rewards customers for repeat purchases. With [Square Loyalty](https://squareup.com/gb/en/software/loyalty, you can view returning customers’ points and reward history in a quick glance and provide a more personalised experience for each customer with a loyalty programme. And this will likely result in more repeat visits to your business. Indeed, sellers who use Square Loyalty see a 40% increase in customer visit frequency.
Opt for the right pricing strategy
With consumers looking to spend less, it can be a smart move to have ample offers on products and multi-purchases, including buy-1-get-1-free deals and discounts for loyal customers. Ensuring an effective pricing strategy that isn’t off-putting to those on a budget can help improve sales and increase your bottom line.
Taking all the above tips into account, you can maximise sales opportunities this Christmas and hopefully still enjoy a profitable festive season, despite the tricky economic climate.
Contact our sales team to learn more about how Square could help your business.