"This year has been the toughest I've ever seen in retail ... it's fair to say even at the height of the GFC."

Anecdotal reports suggest trading had picked up in September and during the school holidays, Mr Zimmerman said, particularly in clothing and footwear, two of the weakest categories this year.

Consumer confidence also improved this month, to its highests level in a year, according to the Westpac Consumer Confidence index.

Foot traffic

However, figures released by UBS last week suggested that weekly foot traffic in shopping centres fell even harder in September – by as much as 12 per cent in the third week of that month – after falling around 4 per cent in August.

"It's definitely a tough market out there," says Kikki.K CEO Iain Nairn. Supplied

The ARA won't issue its Christmas spending forecasts until mid-November, after September retail sales are released by the ABS, but IBISWorld predicts festive season spending to rise just 1.9 per cent.

Retailers generate about 20 per cent of their sales and 60 per cent of their profits between November 15 and in the post-Christmas period until January 15.


Most retailers have already locked in their Christmas plans, including orders and staff, and if demand fails to match expectations they could be forced to discount heavily to clear excess stock.

Myer chief executive Richard Umbers said the department store chain's planning for Christmas 2017 started soon after Christmas 2016.

"We review what's worked and what hasn't and we try to build on the successful aspects," he told AFRWeekend.

"Last year Giftorium was a success for us, so was online – those are two things we've invested in this year as well."

Mr Umbers remains characteristically upbeat about Christmas but admits the August retail sales figures were sobering.

"Certainly the ABS figures are disappointing but they do bounce around a bit. It's only one month and it's too soon to say Christmas is going to be disappointing," he said.

"I'm not taking a pessimistic view of Christmas at this stage. There's some belief that customers are keen to get out there and of course they are still going to do their shopping.

"We've invested in it heavily and it's a very important time of year for us."


Memorable experiences

Myer is investing in stores to create theatre and memorable shopping experiences, building 517 gifting installations, up from 312 last year, in its Giftorium formats.

Personalisation, including monogrammed handbags, engraved perfume bottles and personalised foods such as Tim Tams will also be a major theme.

Myer is also making sure it takes advantage of the trend for consumers to do more of their Christmas shopping during online promotions such as Black Friday and Cyber Monday, which have become as popular in Australia as they are in the US.

Last week it signed up to Australia Post's new subscription-based shipping service, Shipster, which gives subscribers free shipping for orders worth more than $25. It has also been experimenting with same-day deliveries in selected areas.

"It's designed to be a very strong offer online and in physical stores," Mr Umbers said.

Mr Nairn said that while the outlook for Christmas was challenging retailers needed to focus on taking their share of sales rather than pulling in their horns.

"We know the spend will come, whether it's slightly up on last year or slightly down on last year, the spend will come," he said, outlining plans to augment Kikki.K's bricks and mortar and online stores with 30 pop-up locations and expand its Christmas products range.


Taking no chances

Food and grocery stores are less reliant on pre-Christmas spending than general merchandise retailers, but the major supermarket chains are taking no chances, particularly after sales in the supermarket sector grew in August at the slowest rate since June 2016.

"Our planning for this quarter really starts at the end of Christmas last year," said Woolworths' director of buying and merchandise Steve Donohue.

"We've just pulled together every one of our store managers from all around the country in the last couple of days in conjunction with suppliers to talk through how we'll bring those plans to life," he said.

"At the end of the day having a plan is one thing but the way it comes to life in stores and engages customers is altogether different – that's really where it matters."

Woolworths' Christmas strategy revolves around two key shopping themes – permissible indulgence and health and wellbeing – while taking into account the fact that household budgets are under increasing pressure.

"People do have to spend a lot more money at Christmas time and we want to make it as affordable as possible," he said.