November 30, 2012 8:22 pm

Battle to open consumer wallets

Promotions and early sales are at record levels this year as shops battle it out to entice cash-strapped consumers ahead of Christmas.

Many observers and retailers are signalling a bleak Christmas season, as households preserve cash for another uncertain year. However, some believe the quiet start to the traditional shopping period will lead to a December scrum on UK high streets.

According to a survey of 100 high street retailers carried out by PwC, the professional services firm, 60 per cent of shops this week had sales or advertising promotions in their shop windows. That is up 11 per cent on last week, and up 6 percentage points from the same time last year.

However, Christine Cross, chief retail adviser to PwC, said that including other offers such as internet vouchers, which go viral and are sometimes accepted in-store as well as online, the total probably exceeds 2008’s 75 per cent.

“High Street [retailers] have been caught out,” she said. “They have calculated the cost of giving vouchers to loyal customers, but then more people use the voucher than intended [as people pass them on to friends].”

The spurt of discounting comes as the weather further damped shoppers’ spirits in November, pushing year-on-year sales down 0.2 per cent, according to BDO, the accountancy firm.

“The second half of November was particularly poor with consumers seemingly unwilling to make early festive purchases,” said Don Williams, head of retail at BDO. “But there’s no indication Christmas will be worse than last year – so there’s going to be scrums across Britain’s high streets in December.”

The declines in November were led by a 0.5 per cent drop in fashion sales, which slumped after a temporary boost from parents’ shopping during half-term. Sales in gift, leisure, health and beauty items were broadly flat during the period. Only homeware sales rose, by 0.5 per cent, bucking five consecutive months of declines.

Internet, mobile and catalogue sales, however, continued to grow, increasing by more than a quarter compared with the same month last year.

Internet competition coupled with a weekday Christmas could lead to more retailers discounting in order to attract footfall in the festive run-up, said Mr Williams.

“Given Christmas Eve falls on a Monday, we’re going to see a lot of late shopping the weekend before and more promotional activity as retailers lose their nerve and go for sales early,” he said. “Consumers are cautious and nervous and a bargain will bring us over the threshold of a store.”

The projection follows disappointing official retail sales data for October. At the same time inflation rising from 2.2 per cent to 2.7 per cent has intensified the squeeze on wallets.

The past month has seen Comet go into administration with the loss of up to 6,600 jobs as the big box electronics retailer looks to close more than 200 stores.

Supermarkets have been ramping up special offers, combining “on shelf” discounts with a variety of cashback and petrol voucher incentives. “If you add on-shelf with [cashbacks] they are spending a lot more on reductions than they have ever spent before,” said PwC’s Ms Cross.

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