European consumer not so optimistic about near future

European consumers forced to make trade-offs within this year's Christmas Budgets. Europeans spend an average budget of €590 on Christmas gifts and outlay.
9 Nov 2010

Brussels – 9 November 2010 –The 2010 Xmas Survey is Deloitte's 13th survey of year-end holiday season purchasing intentions among European consumers. Overall, the unfavourable environment has caused the European consumers to postpone their hopes of an economic upturn. Consumers will be forced to make trade-offs within their Christmas budgets, and have made lasting changes to their buying behaviours over the last few years.

This year's survey covers 19 countries, including countries affected by severe budget rationalisation measures – for example Greece and Spain. Over the last two weeks of September, Deloitte questioned a broad representative sample of consumers (consisting of 20,655 respondents) in order to assess their mindsets and their planned spending on gifts, meals and out-of-home entertainment and leisure.

"Consumers are subject to conflicting influences, torn between an unfavourable economic environment and the existence of innovative, market-creating products. In order to continue interacting with consumers, both manufacturers and retailers now need to incorporate new media into the way they communicate with consumers. These media are, among other things, quickly appropriating the role of traditional communication channels in guiding consumer choices", explained Koen De Staercke, Head of Consumer Business for Deloitte Consulting in Belgium.

Prevailing uncertainty is affecting Christmas spending plans

Since the financial crisis emerged in 2008, 1 out of 2 European consumers still considers the economy to be in recession today. Also, the average European consumer has given up hope of a recovery in 2011, with only 1 out of 4 believing that the economy will change for the better next year. Not surprisingly, Greek, Irish and Portuguese consumers, hardest hit by the crisis, are the most pessimistic.

1 out of 3 consumers is not confident about their job security, which means that job security has diminished across Europe compared to last year. Only German consumers are an exception: they feel more secure, a small but important sign of optimism as the German economy is Europe's most important economy.

Most European consumers are rather sceptical and are planning to reduce their Christmas spending budgets by 2.5%, and will be spending, on average, €590 on meals, gifts and out-of-home entertainment and leisure. Overall budgeted spending on food will be maintained at the expense of gifts and out-of-home entertainment and leisure.

Forecast spending evolution in southern Europe and Ireland is significantly negative. Germany and the Benelux countries are showing better projections with a 1.7% projected decrease in Belgium and slight increases in Germany and Luxemburg. For most of the European countries, the decrease in the expected spending pattern already started in 2007, one year before the financial crisis burst out.

Finally, it is interesting to note the approximate total spending budget levels across Western European countries, which represent a very wide spectrum. Consumers in Ireland and Luxemburg are among the most extravagant, spending €1,020 and €1,200 respectively. At the other end of the scale, Greek consumers are, unsurprisingly, the least extravagant (€410), pitching their budgets at the same level as Dutch consumers, whose spending habits for the year-end holiday season have historically always been modest.

In order to remain within planned budgets, consumers are making spending decisions that illustrate a lasting change in buying priorities

All strata of the population, irrespective of age, education or wealth, have been influenced by the challenging economic conditions of the last few years. Consumers have changed their buying behaviour with a preoccupation to keep budgets under control, which results in altered behaviour patterns.

Firstly, consumers are seeking to buy items of high utility value; this very simple concern, which appeared with the 2008 crisis, is becoming embedded in long-term behaviour. Consumers also are buying fewer gifts for fewer people, searching for less expensive gifts and focusing on special offers at favourable prices.

Major brands are increasingly losing their seemingly untouchable position and status that they enjoyed before the crisis and this is undoubtedly a lasting change. A new equilibrium is being established between major brands and private labels.

European consumers are also clearly paying increased attention to the sustainable development theme. On this subject, many Europeans indicate product packaging carries insufficient information, particularly with regard to the origin, the composition and the nutritional attributes of food products.

The position of gift vouchers in the hierarchy of gifts is rising each year. After being the most wished-for gift in Belgium in 2007, it has now also attained Number 1 status in five countries (Ireland, UK, Belgium, Holland and France).

Koen De Staercke: "The conclusion of Deloitte's 2010 Xmas Survey is that consumers' behaviour has evolved from scepticism to realism: the economic environment is still perceived as uncertain, and consumers have settled with this current state of economy. They do not expect major changes in the future and have adapted to it by maintaining defensive consumer behaviour."

Traditional distribution channels are significantly impacted by changing buying behaviours as a result of the momentum of Internet use

Consumers are using the Internet as a tool at every step of the buying process: No less than 71% of the European respondents say they use the Internet to get information about their intended gift purchasing. From looking for gift ideas to finding prices, consumers' opinions and the best place to buy gifts (which is frequently on-line), the Internet is meeting the expectations of many consumers.

In eight of the countries surveyed, the Internet has won its place among the top three distribution channels. In Europe's largest economies, the United Kingdom and Germany, consumers even ranked it the Number 1 channel for buying gifts.

In a weak economy, market share gains made by the Internet channel are particularly significant during the year-end holiday season spending peak. This phenomenon is affecting traditional retailers and encouraging them to offer their products on a multi-channel basis.