Father Christmas arrived at the Nottingham Co-op on the back of a vintage truck this year, gift wrapped and trussed up like a giant turkey. As an entrance, it lacked the drama of his traditional starlit dash across frozen wastes with sleigh bells jingling and reindeer prancing. However, parents should be grateful that the old fellow at least turned up to take his rightful place at Co-op House: Santa’s Christmas grotto, once a festive feature in all big department stores, is vanishing faster than melting snow.

‘Tis the season to be jolly but with shopfloor space at a premium and new lines to promote, ‘tis also the time of year when the accountants decree that every square foot of shop floor must pay its way.

The closure of many toy departments and increased workloads for display staff are other commercial pressures which have put the squeeze on Santa, according to Emma Parker, spokeswoman for the House of Fraser chain.

“Our flagship stores - like Rackhams in Birmingham - still have grottoes, but there are not as many as in the past,” she says. “Making the store look attractive for Christmas is our priority. A grotto is a real luxury.”

Some retailers have compromised with the shopping mall solution: a nomadic Father C who roams around or sits on his throne in a spare corner. But for traditionalists who want their children to experience the real thing, this downsized Nineties version can be only a pale imitation. Several vital ingredients are lacking, not least a sense of magic and the Narnia-like thrill of crossing the threshold into an enchanted and mysterious world.

This could be why only one in 20 shoppers now makes a special trip to see Santa, according to a recent consumer survey. Yet at stores such Derrys in Plymouth, where staff pull out all the stops to capture children’s imagination, the customers are queuing in droves.

“They come from miles around to see the grotto,” says deputy manager John Simon. “We broke with tradition last year because we were re-building the store, and a lot of people were very disappointed.”

This year’s grotto is a traditional icy “winter wonderland”, inhabited by animated models of Snow White, Prince Charming and assorted furry animals. Reindeer peep out from behind a huge sleigh heaped with presents, and every letter to Santa’s postbox will receive a personal reply on glitter-strewn parchment.

John Simon says the store, run by Plymouth and South Devon Co-operative Society, tries to emulate the true spirit of the season. Entrance to the grotto is free and includes a badge and balloon from Father Christmas. There’s a strictly low-key approach to presents: parents choose from a selection of budget-priced stocking fillers. There’s also a wishing well for a children’s charity.

“We have two Santas, both mature family men and fairly generously built. One already has a long white beard. They love playing the part and we are totally happy with what they do.”

To sit or not to sit on Santa’s knee is a question that has vexed many stores. As a spokesman for Harrods in London says: “There are no guidelines on contact.“A few have banned it, but most leave the decision to parents.