The weakest run-up to the Christmas sales period in four years and the absence of a"killer gift" to get shoppers moving mean Australia's major retailers will have a less than festive season this year,analysts predict.
Store foot traffic is down about 1 per cent compared to last year so far this season, according to research by Citi, which fingered weak household income growth and consumers having to spend more on essentials like mortgagesand utility bills for the shopping slump.
"The signs are not great because the lead-up has been soft, discounting has been pulled forward and there are few 'must-have' items this year," analysts led by Craig Woolford wrote.
"Christmas day falls on a Monday which will result in a late surge, but the buzz is not strong so far."
More shoppers were planning what to buy online before hitting stores this year, which cut down on "window shopping", Citi said, and there was a less exciting range of products on shelves.
Mr Woolford saidmany of the hottest presents - such as Hatchimal minis and Star Wars Lego toys-were variations of items that were popular last year.
Citi's other top gifts this year are L.O.L Dolls, the Call of Duty video game,the Google Home digital assistant, xBox One gaming console, wireless headphones, Aesop beauty products, tri-fold wallets, and pom-pomkeychains.
Christmas can be a make-or-break period for many retailers, with December accounting for almost 16 per cent of sales and up to 38 per cent of profit at department stores, according to Citi.
As well as lower sales, Mr Woolford said many retailers had too much inventory on hand because of the weak run into Christmas, which would lead to discounting and hurt profit margins.
Hipsters are getting bigger
While large retailers were struggling,Kevin Moore, chairman of the retail consultancy CROSSMARK Asia Pacific, said there were bright spots in the Christmas sales rush.
He said independent retailers selling carefully sourced products or their own artisan wares in small stores were becoming part of the Christmas shopping landscape in a way he had not seen before.
"Great service, unique products at not-cheap but acceptable pricing for the level of workmanship that goes into it is working all across the western world," he said.
"They're authentic: haven't got everything in stock, they run out of stock because they've got to make it, they run out of stock because they've got to source it - but they're honest with you and there's a real feel."
This retail revolution was driven mostly by millennials who were opening stores in once-down trodden but now gentrifying shopping strips in places like as Melbourne's Fitzroy and Sydney's Newtown.
"This is the millennial change - the hipsters are growing, and they're feeding their families and they're doing it with something they enjoy," Mr Moore said.
Citi said consumers' shopping was constrained by income growth in the year to date of 1.7 per cent, compared to the 20-year average of 5.9 per cent.
Discretionary retail spending had been maintained from 2014 to 2016 by consumers dipping into their savings and housing-related purchases off the back of the the real estateboom, but it has slowed dramatically since mid-2016.
The Australian Retailers Association and Roy Morgan Research have predicted Australians will spend more than $50 billion between November 15 and December 24 - about $1.3 billion more than last year, representing growth of 2.8 per cent.
ARA executive director Russell Zimmerman said a shift to online shopping would be the driving force behind sales growth this Christmas, accounting for 7 per cent of all retail sales presently and growing at 5 per cent a year.
The latest Westpac Melbourne Institute Index released Wednesday showed consumer confidence had risen to a four-year high in this month, jumping 3.6 per cent thanks to the slender chance of an interest rate hike and rising employmentnumbers.
Westpac said the "feel-good factor" of the same-sex marriage vote also contributed to the improvement in Australian's confidence in their income stability, economic future and spending decisions.
