The festive season is a cornerstone for retail, often setting the tone for the entire year's performance.
This period not only highlights shifts in consumer behavior and sales trends, but also tests retailers’ ability to adapt to evolving economic pressures.
Beyond driving year-end sales figures, this period serves as a test and sets the stage for business strategies for the coming year. The rise of Black Friday and Cyber Monday has disrupted the traditional dominance of Christmas and Boxing Day sales, as cost-of-living pressures push shoppers to prioritise discounts. This has created a competitive shopping window that requires retailers to refine pricing strategies and innovate to maintain consumer engagement beyond peak sale periods.
With strong spending reported over the recent festive period, the potential for retail growth in 2025 looks promising. But retailers remain agile, innovative, and prioritise delivering personalised experiences to stand out in a shifting, competitive landscape.
The numbers
Many Australian retailers have reported a successful festive season, building on a strong Black Friday performance. Warm weather contributed to a 5.5 per cent year-on-year uplift across the four-day sales event. According to Roy Morgan, shoppers were forecast to spend $69.8b in the six weeks leading up to Christmas, reflecting a 2.7 per cent increase from the previous year. This positive trend continued through Boxing Day, with shoppers forecast to have splurged another $1.3b. In addition, spending in the six days following Christmas was projected to have reached $3.7b, another 2.7 per cent uplift from the same period last year.
Despite an uncertain economic outlook, these figures validate pre-Christmas forecasts, indicating positive year-on-year Christmas sales growth across the retail sector. This growth aligns with a significant rise in the Consumer Confidence Index (CCI), which stood at 92.8 points in December 2024, up from 10.7 points from December 2023. However, a slight decline from November’s peak of 94.6 points shows that challenges remain.
Overall, margins remained stable amid strategic discounting. Early sales data shows that most retailers experienced flat or increased gross margins, with very few reporting declines. Early Boxing Day discounts, introduced around 20 December, were designed to encourage consumer spending rather than clear excess inventory. While sustained discounting may seem to pressure margins, retailers successfully planned promotions through supplier-funded discounts or targeted inventory sourcing, protecting gross margins while enticing shoppers to spend.
The 2025 outlook
Looking towards 2025, consumer confidence looks strong. However, retailers must remain vigilant, as key interest rate decisions by the Reserve Bank of Australia and the upcoming federal election will shape policy in the coming year and beyond. The Australian dollar’s current low against the US dollar adds to the challenges, potentially leading consumers to exercise restraint in discretionary spending.
In addition, the political landscape, particularly the implications of potential trade tariffs, could complicate matters. While these tariffs may not directly impact Australia, their ripple effects on global supply chains could affect the domestic economy. Retailers must stay informed and proactive to navigate these complexities.
Alongside this, rising consumer expectations for service and increased competition for sales are set to intensify as consumers become savvier with their money. International tourism may also offer a boost, as the weak Australian dollar increases tourists' spending power, making Australia a more attractive travel destination.
Putting your best foot forward in 2025
As we transition into 2025, it’s crucial for retailers to leverage insights from the festive season to inform their strategies moving forward. Your ability to adapt to evolving trends and consumer expectations will be pivotal for success.
To explore the future of retail further, join our upcoming seminars in Melbourne and Sydney where we’ll discuss key trends and strategies for success in 2025 and beyond. Alternatively, if you’d like to discuss any of the above with one of our experts, please reach out.
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