The Christmas period is usually the most important time of the year for many retailers, both large and small. In 2011, industry experts and commentators believe that this Christmas period will be 'make or break' for many Australian businesses.

This year's annus horribilis for Australian retail has seen a large number of very high profile collapses, most recently from veteran clothing chain Fletcher Jones, which went into administration on 7 December. Traditional shopping strips have also experienced an uneven year, facing not only reduced consumer spending, but also competition from large shopping centres and discount outlets.

Small businesses in Queensland are predicted to be in for a particularly tough time as compared to the rest of the nation, according to the Sensis Business Index.

The index indicates that only 26 percent of businesses in the state are expecting busier-than-usual trading conditions over the upcoming Christmas period. Around 36 percent of retailers are bracing for a drop-off in consumer activity.

Echoing the Sensis report, the Australian Retailers Association (ARA) predicted a minimal 2.2 percent rise in sales activity from mid-November to 24 December 2011, with a projected sales figure of $39.5 billion for the period.

The ARA's executive director, Russell Zimmerman, believes that a breakdown of the projected figures indicate an even more troubling situation.

"ARA predictions indicate apparel and footwear sales could slump down 1.9% lower than last year's festive trading period," said Mr Zimmerman. "Department stores are also expected to drop by 1.5% and hospitality -0.8%."

Only a few industry areas may receive a boost on last year's sales, particularly household goods and food.

"Industry categories which traditionally count on the festive season as their biggest trading period will be bracing themselves for more of the disappointing trade they have experienced over the last eighteen months," said Mr Zimmerman.

"Retailers who are usually optimistic about the festive period fear sales will be worse than last year, with over 60 percent expecting fewer sales. Fifty-four per cent are putting goods on sale in the lead up to Christmas, and 74 percent said shoppers are looking for low prices rather than customer service or convenience."

This is in line with D&B's recent Consumer Credit Expectations survey, which revealed more than half of the people surveyed had no plans to make a major purchase over the next three months.

The Sydney Morning Herald's Adele Ferguson noted online sales from overseas retailers as being a concern for the retail industry, in particular, and that any tax on online sales would likely cost more than it would generate. Ms Ferguson also notes that the government should rethink its decision to cut a $15 million budget allocation to a small business online program, if it is sincere in its desire to help Australian retailers.

The retail industry will also likely be hurt by pessimistic consumer sentiment regarding the shaky global economy, a drop in house prices and job security.

But some optimism remains despite the uneven sentiment, as small businesses take a proactive approach by increasing advertising activities and extending their trading hours.

The Reserve Bank rate cut announced on 6 December is also expected to be of some benefit to retailers, with an earlier D&B survey of businesses indicating more than a third of executives cited interest rates as the primary influence on their business.

However, a more recent D&B survey has shown that retailers have recorded renewed optimism heading into the March quarter of 2012 off the back of a strong anticipated result for the annual New Year sale period. The industry's profit expectations are the highest for the first time in a year; and expectations for profit, employment and investment have also risen.