Bigger discounts expected as shops try to boost sales

people shopping Image copyright European Photopress Agency

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.

But 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.

And it also 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 copyright Getty Images
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.

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