It's starting to look like a frugal Christmas in Australia

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Australians appear determined to spend less on presents and have a frugal Christmas this year.

According to research by industry analysts IBISWorld, Christmas shopping will be relatively flat, growing by only 0.4% in December as consumers look for bargains and discounts.

“It’s likely that Christmas 2016 will be characterised by discounting and price conscious consumers being more discerning with their festive spend,” says senior analyst Nick Tarrant.

“Across a broad swathe of consumer industries, IBISWorld has identified behaviour in the lead up to Christmas which suggests it will be a rather unremarkable one for retailers.”

Other research by tells a similar story of an emerging thriftmas. Its annual Christmas Spending Survey recorded more than 70% of the 1000 respondents saying a rising cost of living is why they’ll be spending less on gifts. That compares with less than two-thirds in 2015.

A quarter plan to spend less than $200 in total on Christmas presents; 40% more than $500 and 12% more than $1000.

The reasons given include the increasing cost of private health insurance, higher fuel, power, phone and grocery costs, and wages remaining static.

The November the Westpac-Melbourne Institute Consumer Sentiment survey also pointed to a more downbeat Christmas.

The survey included an additional question on plans for spending on Christmas gifts, showing 34% plan to “spend less”, 52% “the same” and 14% “more”.

However, even weak spending growth produces enormous flows of cash in just a few weeks.

The Australian Retailers Association and Roy Morgan Research annual Christmas spending figures indicate shoppers will drop more than $48.1 billion from November 15 to December 24. The retail store spend last year was $47 million.

Some stores will do better than others.

According to IBISWorld, department store takings are expected to fall, with sales 2.8% lower than this time last year.

“Sales will be hurt this Christmas season by competition from online retailers and heavy discounting in the industry,” says Tarrant.

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Consumers are expected to put off luxury purchases which will affect sales at David Jones and Myer which cater for the high end and medium-to-high end of the market. The two make up almost 30% of overall department store sales.

Christmas spending on electronic goods is expected to remain relatively flat, rising by just 1.9% to $1.5 billion.

This will largely be driven by a decline in big-ticket sales, such as TVs and laptops, as consumers seek budget alternatives or hold back until Boxing Day sales.

Larger players including JB Hi-Fi and Harvey Norman dominate the market and their established brand presence is likely to drive consumers in-store, although these players may have to rely on discounts and other incentives.

Dick Smith Electronic’s physical stores are absent this year following its collapse in June.

Spending on jewellery is forecast at $451.8 million in December, according to IBISWorld.

“Fast fashion jewellery retailers, such as Lovisa, are expected to fare better than their fine jewellery counterparts this Christmas, as their lower pricepoint and disposable nature make them an affordable Christmas gift,” said Tarrant.

Liquor sales are expected to grow by 3.4% this Christmas, according to IBISWorld. About 13% of Australian yearly retail alcohol sales are in December.

Online retailers are expected to be the big winners. IBISWorld expects spending during December to grow by 17.3% on last year with $75.20 spent per capita. However, this also includes bricks-and-mortar retailers with an online presence.

“Clothing, personal accessories, liquor and lightweight electronic goods are among the most popular online choices, as these products are often from well-known brands that consumers can trust,” says Tarrant.

“Improvements in transaction security, increased assurance in product authenticity, reduced delivery times and a growing acceptance of online shopping among older consumers are also expected to drive sales growth for e-tailers.”

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