Discount deluge doesn't deliver for high streets

Consumer spending has soared this year, but retailers aren't feeling too festive.

by Rebecca Smith
Last Updated: 23 Dec 2015

Christmas might be for giving, but retailers are starting to take fright. Consumers are splashing the cash but it hasn’t translated into particularly impressive festive trading on the high street.  

New Barclaycard research found the level of spending in 2015 rose in every category it measured apart from fuel – where prices have dropped considerably thanks to the global oil rout. Yet consumers continued to ‘penny-pinch’ on groceries and clothing even though prices fell.

While the total number of transactions rose 8.3% in the 11 months up to November 21 compared to the same period a year ago, the amount spent per transaction dropped 4.1%. Discount stores continue to draw in the crowds – spending at them grew by 12% and volumes were up 18%. People may be spending more, but it hasn't done enough to lift a lacklustre Christmas period for traders.

Insolvency firm Begbies Traynor compiled research tracking the levels of corporate distress among UK retailers between 1 October and 17 December 2015 and found nearly 25,000 – predominantly small and medium-sized retailers – were suffering ‘significant financial distress’. That's slightly up on last year, but the outlook is more worrying now, considering the low levels of inflation and rising disposable incomes. 

While levels of distress recorded won’t just come down to sales, it’s evident that drastic discounting isn’t enough to buck the downward outlook. The figures suggest consumers may well be growing desensitised to the stream of heavy discounting the past month has brought, as they look for bargains as the norm rather than on specific days. 

‘This year there has been more discounting than ever before from retailers in the run up to Christmas, as Black Friday deals extended into more severe festival promotions to try and boost lacklustre sales volumes,’ said Julie Palmer, a partner at Begbies Traynor. ‘The swathes of cut price deals seem to have had little effect, with levels of financial distress among retailers even higher than last year’s shocking statistics.'

Food retailers have apparently been hit hardest – 4,226 were said to be in significant financial distress, up 11% from 3,819 last year. But the move to online was felt by retailers across the board. Consumers spent £1.1bn with UK online retailers on Black Friday and bricks-and-mortar stores will now be looking for the last-minute shoppers who missed out on pre-Christmas delivery to up the disappointing numbers.

Springboard suggested an upswing could be on the cards, with footfall rising 5.2% week-on-week for another unnecessarily named shopping day – Panic Saturday. But shopper numbers were still down 4.7% compared to 2014.

With all this in mind, Marks & Spencer has gone and launched a jeroboam of prosecco in an effort to mop up any late festive shoppers. It will be the biggest bottle of the Italian fizz on the UK high street and sold for £45, containing the equivalent of four standard 75cl bottles, or around 20 glasses.

It might seem a little ambitious but after all, British shoppers did spend more on prosecco than champagne this year. M&S prosecco sales were up 29% year-on-year to the end of September and grew 90% over the past two years. Which is all well and good until the likes of Aldi and Lidl pop up with their super-sized substitutes at better prices.


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