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One in three SMEs expecting Christmas sales dip: Report

Tuesday, 6 December 2011 | By Michelle Hammond
Nearly a third of small businesses are expecting a worse Christmas trading period than last year, with conditions “historically weak” for retailers, according to a new report.

 

According to the latest Sensis Business Index, based on a survey of 1,800 small businesses, 26% of businesses are expecting trading conditions to be busier this Christmas.

 

However, more than 30% of respondents are expecting conditions to be quieter, while the remaining respondents expect no change from last year.

 

Of those that are expecting an upswing, an average increase of 20% is predicted. Businesses anticipating a downturn in trading are expecting conditions to be 24% slower than last year.

 

More than 20% of businesses are planning activities to manage the Christmas period. Increasing advertising is the most popular activity planned, from 24% in 2010 to 27% this year.

 

Other activities include introducing sales promotions (15%), increasing staff (8%), adjusting stock levels (8%), extending trading hours (7%) and changing advertising (7%).

 

Report author Christena Singh says the results indicate small businesses are taking a “slightly more proactive approach” to managing the Christmas period this year, albeit in different ways.

 

“In the accommodation, café and restaurant sector, it is about gearing the business up for a traditionally busy period of the year,” Singh says.

 

“For other businesses, for example in the finance and insurance sector, it is about managing the business through one of the quietest periods of the year.”

 

While the Sensis research suggests business confidence is improving, the latest Dun & Bradstreet report paints a different picture, with local firms registering a sharp decline in confidence.

 

According to Dun & Bradstreet’s latest Business Expectations Survey, sales expectations have fallen five points while profit expectations remain flat, based on results recorded last month.

 

The survey is based on the responses of 1,200 business owners and senior executives, representing major industry sectors.

 

The drop in sentiment was particularly evident among manufacturers and wholesalers, with sales expectations plummeting by more than 15 points since October.

 

Caution by business is also being reflected through increasing concern over interest rates, with one third of the executives surveyed citing this as their biggest concern heading into 2012.

 

According to Dun & Bradstreet chief executive Christine Christian, the escalating situation in Europe is increasingly an issue for local businesses.

 

“The sudden drop in business sentiment over the course of the last month, following fairly solid results in October, indicates the degree of volatility that is being felt,” Christian says.

 

“This is obviously being exacerbated, particularly in sectors like retail and manufacturing, by a high Australian dollar and the changing composition of the economy off the back of... mining.”

 

Of particular note has been the significant increase in the proportion of firms citing access to finance as an issue. This has nearly doubled to reach 14% since of the middle of this year.

 

Over the same period, the proportion of firms citing access to, or a shortage of, funding – as the biggest barrier to growing their business – has nearly doubled.

 

“This month’s dramatic dampening of sentiment is a warning that local firms are coming up against a number of key growth and productivity challenges,” Christian says.