David McCorquodale, UK Head of Retail at KPMG, comments on the latest Retail Sales figures from the Office for National Statistics:
“On the surface these figures show another healthy performance by retailers, with sales moving steadily in the right direction. However, scratch a little deeper and it seems that this month’s rise in sales has been driven by intense promotional activity by the department stores.
“What we don’t know is what the long term effect of these promotions will be. Yes they are driving sales, but at what cost to margins and the health of retailers? Whilst discounting can be an effective tool to clear end of season stock and increase footfall, it is not a sustainable strategy and over time may do more harm than good.
“Sadly the need to discount to drive sales may reflect the new reality of retailing in a low growth environment. Continued pressure on household incomes, which shows no immediate signs of abating, has turned us into a nation of bargain hunters, and paying full price for certain items rather seems like a thing of the past. Until overall confidence in the economy improves I would expect shoppers to remain highly receptive to the bargain bin. ”
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