Lack of 'must-have' item leading to subdued retail spending

Citi warns early signs for Christmas 2017 are 'not great' for Australian retailers. Photo / 123RF

Aussie retailers are facing a less than merry Christmas this year due to a lack of "must-have" items and subdued retail spending, analysts say.

In a note on Tuesday, Citi retail analysts led by Craig Woolford warned Myer, Harvey Norman, JB Hi-Fi and Premier Investments were facing the greatest hit, with retail sales conditions leading into Christmas between 2-4 percentage points slower than last year.

"Christmas 2017 lacks the 'killer gift'," Woolford said.

"As always there are popular items and toys are innovating, but the top ideas we have surveyed are similar to 2016. For example, Hatchimals were the hot gift of 2016, and Hatchimal minis are popular for 2017. Star Wars: The Last Jedi should give retail a kick along too when it launches on 14 December 2017."

Given December can make up more than one quarter of a retailer's annual profit, "success during Christmas is vital".

"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," Woolford said.

Citi's picks for the hottest gifts of 2017 including Star Wars Lego, the L.O.L. Surprise, Call of Duty: WWII, Google Home, Xbox One and wireless headphones. Also popular are Aesop personal care products, tri-fold wallets and pompom keychains.

"The growing theme in retail is personalisation of gifts from biscuit packets to purses to shoes," Woolford said.

"Retailers have partially embraced but not necessarily exploited the idea to its full extent.

"Myer was early with Nutella and Mon Purse but has struggled to own the idea in our view.

"The Daily Edited was a popular source of personalised product and arguably the largest specialty retailer for accessories. The company is part-owned by OrotonGroup who are in voluntary administration. We expect the brand can continue trading however, Oroton's woes may impact its presence this Christmas.

"In electronics, Bluetooth headphones are popular, but pricing is typically sharp and headphones were popular in 2016 as well."

Top 10 Christmas gifts for 2017:

1. Hatchimal Colleggtibles — Product extension of popular Hatchimals
2. Star Wars Lego — A combination of two global franchises
3. L.O.L Dolls — Bowl-shaped container with 50 toys inside, unboxing theme
4. Call of Duty: WWII — Most popular gaming franchise, 2nd largest release for the title
5. Google Home — Brings the digital assistant to life, some discounting seen already
6. Xbox One — Next generation console, better graphics and processing power
7. Wireless Headphones — Available across all major brands, Bluetooth more popular
8. Aesop — High-quality, plant-based personal care products
9. Tri-Fold Wallet — Three section wallet, folds twice, increased fashion focus
10. Pompom Keychain — Popular fashion accessory with seasonal spin