As shoppers across America gear up to take advantage of the big discounts on offer in the Black Friday sales, David McCorquodale, head of retail at KPMG, warns that tough Christmas trading conditions in the UK are likely to spark early discounting on high streets across the country here too:
“A strong performance at Christmas will always form the backbone of a healthy retail business, so it’s worrying that footfall and sales to date in this crucial quarter have been lacklustre at best, especially when they are being measured against ‘soft’ comparables last year. UK retailers have just five weeks of trading left to fight for their share of the festive wallet and unless November’s figures reveal a sudden revival in sales, it’s likely we’ll see a spree of early discounting in December.
“This is reflective of the relationship between retailers and their customers today where there’s a level of expectation amongst consumers that bargains will exist during this period. It’s easy to forget that discounting used to be the method retailers used to clear excess stock after Christmas. Now, with family budgets constrained in a difficult economic environment and with so much price comparability on line, it’s seen as one of the primary ways to drive sales – even when the stock has just hit the shelves.
“A number of retailers have already begun discounting product lines, hoping to gain advantage over competitors and drive footfall. This discounting has taken different forms, from flash sales to quietly changing the prices in stores and on-line to match competitors’.
“Some sectors seem more prone to discounting than others. It seems inevitable that we will see price wars in the budget women’s fashion sector, where price remains the key differentiator for customers. Electricals will also be a battle ground this year in the wake of the situation at Comet.
“The grocery giants will have a very aggressive Christmas and most have already begun discounting both luxury products and Christmas basics to offer their customers the best value basket of shopping.
“Retailers must think carefully and creatively when deciding what, and by how much, to discount. After all, sales at any margin can lead to problems in the New Year.”
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