Page last updated at 00:01 GMT, Thursday, 17 December 2009

Will it be a happy Christmas on the High Street?

By Shanaz Musafer
Business reporter, BBC News

Shoppers walk past Christmas-themed window display
The Christmas trading period is crucial for retailers

With just over a week to go until Christmas, High Street retailers will be hoping for a final festive splurge from shoppers.

But while some are seeing record sales, others are still feeling the chill winds of the recession.

Last Christmas saw us bid farewell to Woolworths, as the chain best known for its pic'n'mix sweets became the most high-profile casualty of the recession.

Since then, Zavvi and MFI have also ceased trading, while Borders bookstores and Threshers and Wine Rack are also under threat.

So what factors have been helping and hindering the High Street?

THE WOOLWORTHS EFFECT

Shoppers walk past closed Woolworths branch
Woolworths closed its doors for the last time in January 2009

The demise of Woolworths may have left a hole in High Streets, but it has benefited several of its rivals.

According to research house Verdict, supermarkets have been the biggest beneficiaries, with Tesco admitting it has seen particularly strong growth in its toys and entertainment divisions.

Tesco has picked up some £71m of Woolworths' sales, second only to Asda, which has seized £75m.

The toy industry, in which Woolworths had 14% of the market share, has also been reshaped, with the likes of Argos, Toys R Us and the Entertainer picking up the slack.

And discount stores have moved in to fill many of the empty sites.

"It's very sad that Woolworths has gone, but from a business perspective, it's been a great opportunity," Jim McCarthy, chief executive of Poundland, has said.

Similarly, the withdrawal of Zavvi - the music, games and DVD chain - as well as Woolworths from the market has aided HMV.

In fact, HMV cashed in on Zavvi's misfortunes, snapping up and rebranding 32 of its stores.

RISING CONSUMER CONFIDENCE

Biscuit the dog
Biscuit the animatronic dog has been boosting sales at John Lewis

Department store John Lewis says it took more money last week than in any other week in its history.

The £110m it took in sales in the week to Saturday, 12 December, was an 8% increase on its previous best-ever week, seen in 2007.

"The atmosphere in our branches is very festive as across the country, people are out Christmas shopping," says Andrew Murphy, director of operational development at John Lewis. "Even men!"

"The numbers at John Lewis were cracking," says Bryan Roberts, research director at Planet Retail. "The mood at the moment [among retailers] is one of pleasant surprise."

According to the Nationwide, consumer confidence is at its highest level for a year and a half, after hitting a record low in January.

"The mood among consumers is, 'Let's go out on a high and spend before Christmas.' The typical consumer still has a job," says Mr Roberts.

"There is still some concern about job security, but in many ways, consumers are in a better position this year."

And he adds, "There's no such thing as a recession when it comes to kids at Christmas."

This may have something to do with the record sales at John Lewis. One of its most popular toys this year has been Biscuit the animatronic dog - a mere snap at £99.95.

THE RISE OF ONLINE SHOPPING

Amazon website
The High Street faces more competition from online retailers

Amazon, Play.com, eBay - all household names, but you won't find any of them on the High Street.

The rise of so-called "pureplay" companies - or online-only retailers - continues unabated.

However, the success of the likes of Amazon can spell trouble for its High Street competitors.

Borders went into administration last month after struggling to compete with the internet giant.

But it seems that the old adage, "if you can't beat 'em, join 'em," may be true.

More and more retailers are now going "multi-channel", with online sales at John Lewis, Argos and Tesco all outperforming the average year-on-year growth, according to the online retail research group IMRG.

The group expects December sales to reach about £5bn, up from £4.6bn in 2008.

Online shopping is now so popular that people even spend time in front of their computers on Christmas Day.

In 2008, about £104m was spent on 25 December.

"Consumers are looking online for bargains even while they're digesting their Christmas dinner," says David Smith from IMRG.

THE WEAK POUND

London postcards
The BRC says the weak pound has made London attractive to tourists

Sterling fell dramatically against most currencies last year as the depth of the economic downturn became clear.

While this may have made things more expensive for Brits going abroad, the UK, and London in particular, became a cheaper destination for tourists, says Stephen Robertson, director general of the British Retail Consortium (BRC).

"The weak pound continues to make London attractive to overseas visitors and November's record rain brought shoppers in from the suburbs, helping central London department stores in particular," he says.

However, the decline of the pound has left some retailers feeling the pinch as well.

"The weakness of sterling has impacted the supermarkets more than anyone else," says Planet Retail's Bryan Roberts. "The exchange rate has meant their supplies have got more expensive."

THE RECESSION

Although economists largely agree that the worst of the recession is over, we are still yet to emerge from the longest recession in the UK since records began.

After Woolworths, Zavvi and MFI disappeared from the High Street, the future looks bleak for Borders, Threshers and others.

Retailers will be looking ahead to next year with some caution.

"The mood will be anything between quiet confidence and abject terror," says Bryan Roberts.

"Supermarkets and places like John Lewis are doing rather well. A lot of people in areas like furniture and some clothing retailers may be more worried."



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