There are signs that retailers’ strategy to slash prices before the New Year is paying off, as footfall has remained strong in the last stretch. Footfall last week in shopping centres and on the high street was up 2.6% year-on-year, according to the BRC-Springboard Retail Footfall Monitor. Even so, it might not be enough. Retailers’ strategy to cut prices before Christmas to entice shoppers – with the average discount now at 48%, data from PwC suggests – means there is going to be a tight squeeze on profit margins.
The aggressive discounting also means a fair few unhappy customers amongst those who started their shopping early before the sales began. Nevertheless, the announcement today that excessive credit and debit cards surcharges will be banned next year on high-ticket purchases will offer some relief for consumers.
It follows a difficult year for the retail industry. Sales have been consistently weak as flat wage growth and unemployment fears kept shoppers’ spending down. Then there was the effect of the weather – the freezing temperatures last winter and the hot weather over the Easter period kept shoppers at bay. Even the mild conditions had an impact in the pre-Christmas period, with like-for-like sales down 1.6% in November, figures from the British Retail Consortium showed. Although of course it’s always the wrong kind of weather for retailers…
This casts doubts on whether the last-minute rally will be enough to save high streets after a disappointing year. In an ominous sign, accountancy group RSM is warning that 8,994 retailers are facing a high risk of insolvency. And as the last month has shown, even high-profile businesses aren’t immune. Lingerie chain La Senza is fighting to avoid administration, as is shoe group Barratts Priceless, while the future of Black Leisure also hangs by a thread as talks continue over the sale of the business.
January is also a particularly difficult month for shop owners, as customers rein in spending again after Christmas. The festive season is bound to inject a dose of cheer to retailers, but it’s likely the hangover will be long and painful in 2012.