Value for money will be top of mind for shoppers before Christmas as retailers prepare to fight over stretched wallets, experts say, with fresh data showing a spending downturn looms large over the holiday rush.

A “retail recession” that began over the September quarter is set to continue as the cost-of-living crisis hits household budgets, according to forecasts published on Tuesday by Deloitte Access Economics (DAE).

Higher costs for essentials like rent, mortgages, utilities and health care are driving down discretionary purchases, DAE said, with retail trade forecast to fall 1 per cent over 2023-24.

“In this environment, the retail recession continues, driven by consumer caution and sensitivity to prices,” DAE economists stated.

“Retail turnover has now declined in real terms for the last three quarters. Retailers remain optimistic about the holiday period, but it’s uncertain what is to come.”

Retail experts said the Christmas shopping rush will be defined by cost-of-living pressures, with shoppers likely to see more discounting and an emphasis on value for money.

Queensland University of Technology professor Dr Gary Mortimer said the holiday period – typically the busiest on the retail calendar – will be slower this year but not a “disaster”.

‘More subdued’

“No one is going to cancel Christmas,” Mortimer said. “[But] it will be more subdued.”

Consumers will likely see retailers emphasise value and additional services such as free gift wrapping or delivery as a way to get shoppers to spend, he said.

Additionally, free activities like decoration making and Santa visits will feature at major shopping centres as traders look to “add value above the transaction”, Mortimer said.

“Not everyone wants cheap stuff, but they [shoppers] want bang for their buck.”

Retail Doctor Group chief Brian Walker said shoppers can expect retailers to double down on the presentation of their shops, alongside staff making additional efforts at on-selling.

There’s also likely to be significant discounting, he predicted, because many retailers have lots of stock built up in their warehouse, meaning they will be under pressure to drive sales.

“Inventory levels are heavy,” Walker said.

“We will see lots of priming of pumping [to drive] sales.”

A multi-year trend that has seen Christmas shopping brought forward into November is also set to continue, with Walker saying online discounting events like Black Friday and Cyber Monday could play an even bigger role as stretched shoppers hunt for bargains.

“We’re going to see much less of a strolling-type shopper [and] we’re going to see far more of a targeted shopper,” he said.

Two types of shoppers

Mortimer said there will be two kinds of Christmas shoppers – savvy consumers who take full advantage of discounting to save money; and those who seek to “delay gratification” who will save their money and make purchases in the immediate lead up to Christmas.

“I’m saving Woolworths dollars on my Rewards card to use them in the last week [before Christmas],” Mortimer said.

Additionally, independent butchers and seafood merchants could see success over the holiday period as families looking to save money avoid eating out for Christmas lunch.

“We will have more frugal and informed consumers this Christmas,” Mortimer said.

“Families will cut out the middle man and go direct to the source [for food] … it’ll be fresher, and cheaper.”