The high street is trying to head off its worst Christmas in 25 years with
price cuts of up to 50 per cent, heralding a bonanza weekend for shoppers.
Sales fell at their fastest rate in a quarter of a century this month, a key
survey by the CBI showed, and retailers expect little respite over the
festive season. It rounds off a week that saw two major retailers,
Woolworths and the furniture chain MFI, calling in the administrators. John
Lewis also reported that its weekly sales had tumbled by 13 per cent
compared with the same period last year.
Despite the 2.5 percentage point cut in VAT announced in the Pre-Budget Report
on Monday, more than half of retailers expect sales to be worse than last
Christmas and new year, with only 16 per cent expecting sales to increase
over the next three months. The resulting balance of -40 is the lowest
recorded in November since the CBI’s survey began in 1983.
Slow Christmas sales could be disastrous for many stores. Some retailers
depend on this most lucrative time of the year for a third of their annual
sales. Many stores are now offering 20 to 50 per cent discounts. Some stores
in the West End of London opened their doors at 7am yesterday in the hope of
enticing shoppers in on their way to work. Others have tried to encourage
shoppers by immediately passing on the 2.5 per cent reduction in VAT before
the new pricing structure comes into force on Monday.
The array of inducements to shoppers this weekend — including 50 per cent off
at Liberty, 40 per cent off wine and champagne at Thresher and 30 per cent
off at Gap — is a reflection of the tough times facing the retail trade. But
analysts suggest that the low-price frenzy is a gamble that may backfire on
shops, especially if consumers feel disappointed by the so-called bargains
on offer.
Questions remain over the issue of discount vouchers that offer customers the
chance to redeem 10, 20 or 30 per cent savings off purchases in selected
stores over a limited period. Stores have been sending these to cardholders
and regular customers and some have been aggressively marketed by e-mail to
people in the workplace.
These headline discounts are being promoted to tempt people into stores but
once inside many items are excluded from the special offer, leaving some
shoppers angry and confused.
Selfridges, for example, which sells a range of luxury brands, has offered a
20 per cent discount on production of a voucher for the past week. The deal
ends tomorrow but on scrutiny of the small print consumers will see that
many brands and designer labels are not taking part in the promotion. The
excluded outlets in the store includes DVDs and CDs at the HMV concession,
iPods and iPhones at Carphone Warehouse, designer shoes by Jimmy Choo, Ugg
and Christian Louboutin as well as Nespresso coffee machines and Paperchase.
House of Fraser also launched a two-day 20-per-cent-off promotion on Thursday
and yesterday but there, too, many concessions were not taking part in the
deal. Shoppers discovered this only when they read the notices inside the
store.
Threshers, Wine Rack and Victoria Wine is also offering a 40 per cent discount
on all wines and champagnes until Tuesday. But experts said that these
retailers often charged higher initial prices on items, leaving customers
sceptical of whether they were really getting a bargain.
Martin Izark, an expert on retail practices, suggested that people should shop
around to compare offers with other retailers.
Economists issued a warning that the massive discounts may not do enough to
reverse the slowdown in sales and the pain for retailers was unlikely to
abate soon. “The consumer is in intensive care and is unlikely to be
significantly revived by the VAT cut,” said Howard Archer, of IHS Global
Insight, an economic consultancy.
Vicky Redwood, of Capital Economics, said: “It is doubtful that the recent VAT
cut and price discounting will get consumers to part with their cash when
unemployment is rising and credit is hard to get.”
Retailers are also being hit hard by tumbling inflation, as consumers hold off
purchasing expensive items until prices have fallen further. More than a
quarter of consumers expect prices to fall next year, according to a new
survey from YouGov/Citi.
Inflation fell to 4.5 per cent from a 16-year high of 5.2 per cent last month,
and some economists say that it could fall below 0 per cent next year,
tipping the country into deflation.
Andy Clarke, chairman of the CBI Distributive trades panel and retail director
of Asda, said: “Christmas is going to be extremely tough this year,
with retailers having to work harder than ever to keep the tills ringing.”
The CBI’s doom-laden survey has heightened expectations that the Bank of
England will make another swingeing rate cut next week, with many economists
forecasting a cut of half a point to 2.5 per cent, the lowest rate since
1952.
Mr Archer said that stores would pull out all the stops in an effort to lure
consumers to the checkout. “We suspect that there will be a lot more
discounting, special promotions and flash sales right up to Christmas to try
and get hard-pressed consumers to spend.”
But experts said that consumers needed to keep a close eye on how much money
they were actually saving by choosing discounted items.
Threshers, for example, has a Piper Heidsieck champagne on offer at £29.99 a
bottle before the 40 per cent discount. The Co-op, however, which usually
sells the same bottle for £25.25, is offering it at £16.84.
Wine Rack is selling a bottle of Moët & Chandon champagne at £33.99 a bottle.
With the three-for-two offer the price works out at £22.66 a bottle,
and with the 40 per cent discount the price would be £20.40 a bottle. A
bottle of Moët at Tesco was priced yesterday at £25.86 and at Sainsbury’s
£25.87.
Neil Saunders, senior retail analyst at Mintel, said: “The market is really
competitive. It is basically a climate of who blinks first. A lot of
consumers are holding out but retailers need to clear their stock and so
they have turned to discounting. But if shoppers are disappointed they will
leave a bad taste in the mouth and consumers may go elsewhere. It is a risky
strategy.”
Gavin George, retail analyst at Ernst & Young, said that he expected
discounted items to account for 30-35 per cent of sales by Christmas.
“There is no doubt the 20 per cent sales are driving interest and retailers
are prepared to take risk. A number of retailers are right up against it in
terms of banking covenants and they have to be very aggressive.” he said.
Tim Danaher, the editor of Retail Week, said: “There is an urgency for
retailers to get people through their doors and the very fact they are doing
discounts shows how tough it is out there.”
Trading Standards officers are keeping a close eye on the sales and discount
offers.
Martin Fisher, pricing spokesman for the Trading Standards Institute, said
that under recent government guidance stores were allowed to pursue such
aggressive discounts on sales only for seven days or three weekends in a
six-month period.
He said: “We will have to check these offers do not become permanent sales in
breach of consumer protection regulations.”
Bargain buys
Threshers, Wine Rack, Victoria Wine Until Tuesday, 40 per cent off all
wine and champagne
Gap Until tomorrow, 30 per cent off everything with voucher
Jaeger Until tomorrow, 30 per cent off men’s and women’s accessories
with printout of e-mail in own stores and online, not in concessions
Harvey Nichols 12 Days of Christmas shopping to December 7, 25 per cent
off men’s and women’s fashion and accessories
Selfridges Christmas Comes Early voucher today and tomorrow, 20 per
cent off with voucher; 10 per cent off fragrance, beauty
Whistles Until Monday, 25 per cent off everything in store and online
with voucher
Karen Millen Until Monday, 20 per cent off everything on sale in store
and online with voucher
BhS Today, extra 20 per cent off
Woolworths Until tomorrow, 10 per cent off music, DVDs, games hardware
and software, phones and accessories, electricals, electronic instruments
and sat-navs with voucher; 20 per cent off everything else with voucher
JJB Sports Until December 14, 20 per cent off children’s character
clothing with voucher
Adams Kids Until December 7, 20 per cent off on all purchases in store
with voucher
Liberty Tuesday to Friday, Liberty cardholders only, 50 per cent off
men’s and women’s fashion; 20 per cent off everything else; 10 per cent off
beauty and fragrance
Marks & Spencer December 4, (unconfirmed) 20 per cent off most
stock except food
