Retailers in the U.K. are set to make more money this Christmas — but due to higher prices, not because shoppers are buying more items, according to researchers.
A study by Global Data also found that brands, mainly fashion-related, need to go the extra mile to convince consumers to spend money. "Non-food retailers will continue to struggle this Christmas," it said.
"Volumes are forecast to fall by 0.1 percent as price rises, which came into play as a result of the weakened pound, will discourage cash strapped consumers from shopping over the seasonal period," the research company said.
British government figures showed inflation rising at a rate of 3 percent in October — unchanged from the previous month. At the same time last year, inflation had risen by 0.9 percent. As a result, and with flat wage growth, consumers have less money to spend on non-essential items, like clothes. While revenues could rise for these retailers, that won't necessarily translate into more profit, if the costs for these firms are also increasing.
It's all about in-store experiences.
With the gradual rise of e-commerce, retailers have embarked on a long and difficult battle to attract customers to their physical stores. This battle is accentuated during the Christmas period, with many shoppers choosing to buy online and avoid the crowds.
As a result, retailers have sought to innovate the in-store experience with free gifts, food, theater and more.
In the famous Knightsbridge neighborhood, Harrods is offering Christmas hunts for children, cooking demonstrations to teach shoppers how to prepare a feast, and in-store carol singing. There's also a Christmas tree designed by Dolce & Gabbana, with whom the department store partnered up this year, even hosting a one-off D&G fashion show in its food hall.
"The run-up to Christmas is one of the busiest trading periods of the year. Ensuring that Harrods customers experience the service we are famous for, even during this busy time, shows them how much we value their visit to the store," Michael Ward, managing director of Harrods, told CNBC.
Debenhams, on the other hand, has opted for a fairytale ambience. The retailer kicked off a multi-million pound cross-channel campaign in early November, taking its inspiration from Cinderella. It is offering in-store theater, gift cards and other goodies "as the clock strikes 12 (midday)," selfie stations and a unique item — a crystal-studded stiletto.
"Customers told us they expect to be entertained at Christmas," Richard Cristofoli, Debenhams managing director of beauty and marketing, said in a statement.
John Lewis, meanwhile, has opened its "biggest and most interactive" Christmas market to date. Customers are able to "see, smell, taste and touch an unrivaled collection of Christmas ideas," the store said in a statement.
"We want our department stores to be a source of inspiration, a leisure destination and somewhere our customers will look forward to visiting, somewhere they can while the day away, with access to services and experiences under one roof that aren't available anywhere else," Peter Cross, director of customer experience at John Lewis told CNBC.
Shoppers at the department store will also be able to create their own cocktail, thanks to a partnership with edible cocktail specialists Smith and Sinclair.
The in-store offer is wide. Fourth-quarter sales numbers in the new year will reveal if all the effort will pay off. However, according to Global Data, many retailers might still disappoint.
"After a poor third quarter, clothing and footwear retailers will be hoping for some respite in fourth quarter ... However, Christmas will disappoint many in the sector with another quarter of declining volumes forecast, down 0.6 percent on quarter fourth of 2016," the research firm said.