Bigger discounts expected as shops try to boost sales
|bbc.com 24 Dec 2018 at 09:10|
Bigger discounts than normal are expected in the traditional Boxing Day sales, as shops try to make up for weak trading in the lead-up to Christmas.
On top of widespread deductions already offered by retailers, they will be forced to cut prices further to get rid of unwanted stock, say analysts.
Average discounts of "at least 52% off from Boxing Day" have been predicted by management consultancy Deloitte.
Market researchers including Mintel and Springboard also expect big discounts.
"Yes, there will be further deeper discounts on Boxing Day, that s when it s all got to go," said Richard Perks, director of retail research at Mintel.
However, he cautioned that the sales would be "pretty selective" and largely focused on winter items that have not sold already.
"It ll be things like overcoats, party wear and shoes," he says.
Boxing Day sales are traditionally a way for shops to get rid of unwanted products, so they can bring in new stock but also, crucially, cash to pay for the new stock.
"Post-Christmas sales are incredibly important for a retailer just to keep their houses in order," says Mr Perks.
The latest figures for Christmas Eve show that by midday, the number of shoppers overall visiting High Street shops, shopping centres and retail parks was up 6.8% on last year.
Springboard - which produces the figures - said shoppers were likely to have been tempted by the "opportunity to take advantage of the additional discounts introduced by retailers."
Independent retail analyst Richard Hyman said the high level of pre-Christmas discounting showed the industry was "very distressed".
"Discounts have come earlier, because retailers have far too much stock and not enough cash," he said.
He says the number of retailers on sale, the discounts being offered and the proportion of stock involved are all higher than he has seen in his 35 years working in the retail sector.
Many of the shops are now offering money off most of the time, meaning traditional sales like Boxing Day have become "rather meaningless", he says.
This eternal discounting also means customers are now encouraged to put off purchases, because they know if they wait, the price will come down.
Marks & Spencer - Its sale will launch at 17:00 online on Christmas Eve and in stores as soon as they open after Christmas on either 26 December or 27 December.
John Lewis - Its clearance sale will begin online on Christmas Eve and in shops from 27 December.
Next - Its online sale will kick off on Christmas Eve at 17:00 while the in-store sale starts at 06:00 on 26 December.
Debenhams - Its sale has already started online and will begin in shops from Boxing Day
AO World - Its sale has already started online
The currently level of discounting means that it s a pretty tough environment for retailers, many of which already operate on thin profit margins.
Online fashion retailer Asos recently blamed "unprecedented" discounting for hurting November trading, which it said would lead to weak profit for the full year.
Leading brands including Primark, Ted Baker and John Lewis have also all warned of a slump in sales.
Meanwhile, Sports Direct tycoon Mike Ashley said last month had been the "worst November in living memory" and predicted some retailers would be "smashed to pieces".
Image caption Analysts say some shops are now always on sale
The problem is that customers have become immune to sales, says Diane Wehrle, marketing and insights director at Springboard.
She said most shops went into their "last [final] discounts" after Saturday and the already large discounts on offer mean shops will be cutting prices from a lower-than-normal starting point.
Ms Wehrle also predicts that the traditional Boxing Day period of sales will last much longer than normal.
"There will always be a proportion of retailers continually on sale, there will always be discounting going on," she said.
"That s the problem for retailers. Because we re expecting a discount, we hold off waiting for the bottom to reappear, so retailers are not selling what they need to sell quickly enough."
For consumers, that means holding off could pay off, says Jason Gordon, lead consumer analytics partner at Deloitte.
He says that given the current business uncertainty, many shops are likely to extend their Christmas sales "deep into January, with some having little option but to run through early February and even beyond".
How that affects retailers will become clear in the new year with some retailers likely to be forced to close stores and renegotiate debts to survive.
Mr Hyman predicts many will have difficult talks with their banks.
"The big question is to what extent do the banks want to increase their exposure to an industry having a really difficult time," he asks.