Discounting hits record levels as pre-Christmas sales disappoint

According to Deloitte, shoppers can expect “record” pre-Christmas discounts both in stores and online, with both the volume and value of deals increasing compared to last year. Analysis by the firm found that discounts are currently averaging 41.8%, with that figure rising to 45% by the weekend as retailers launch a final pre-Christmas push.

A quick walk down Oxford Street shows the scale of discounts, with fashion brands particularly hard hit. Retailers including HMV, Marks & Spencer and Gap are all offering promotions while Asos has been emailing its customers offering up to 40% off some lines.

After Christmas, discount levels are expected to rise still further to 53% as shorter trading hours on Boxing Day (due to it falling on a Sunday) increase competition for shoppers.

“Consumer buying habits and seasonal weather patterns are no longer sureties in the market. Retailers will have to consider implementing more flexible sourcing and trading strategy to cope with the volatility in demand,” says Jason Gordon, consumer business partner at Deloitte.

Other retailers, such as electronics, are performing better. Dixons Carphone posted its results this morning (16 December) and profits were up 23% for the six months to the end of October with finance boss Humphrey Singer saying the firm is “optimistic” about the Christmas shopping period.

John Lewis has also seen sales rise this year, posting its best ever weekly sales figures over the Black Friday weekend and continuing to see improved performance.

A tough Christmas at the supermarkets

Trading has also been difficult at the supermarkets, with research from Nielsen pointing to a 1% decline in sales value at the till for the four weeks ending 5 December compared to the same period a year ago. Volume sales were also down, by 0.8%.

With Christmas falling on a Friday, most shoppers are planning to leave their main grocery shop until a few days before Christmas, which Nielsen said could provide a last minute boost to the big four grocers.

However, it cautions that a third of people are planning to do their main Christmas shop at either Aldi or Lidl, suggesting the supermarkets will have to pull out all the stops to win over consumers. That started last week with Asda lowering the price of petrol to under £1 in an attempt to get people through its doors.

“It’s been a very difficult year for the major supermarkets, driven by price deflation and compounded by having to respond to the discounters’ lower prices. Even promotional activity around Black Friday did nothing to boost food sales,” says Nielsen’s UK head of retailer and business insight Mike Watkins.

Festive spending stagnates

A separate report from market research firm fast.MAP shows that Christmas spending growth is slowing. More than two-thirds of UK families (68%) plan to spend about the same amount as last year on food, drink, presents and parties, meaning spending is lagging behind inflation.

Only 9% plan to increase their spend, down from 12% last year. On average, UK families will spend £399 over the festive period, with 9% planning to spend more than £1,000 and 1% planning to spend in excess of £2,000.