One would think that, by the time the Christmas rush to buy presents was over, the majority of UK consumers would actively dread the thought of visiting their nearest shopping centre or outlet village. With tight budgets and a variety of presents to either tidy away or discreetly drop into the nearest charity shop, retailers should logically find the period just after Christmas the sparsest in terms of sales throughout the calendar.
Yet a consumer event almost as popular as Christmas has meant that, rather than a post-holiday slump, stores often struggle to cope with the rush of customers flooding the high street. The January sales see some of the highest customer footfall totals of the year as shoppers attempt to find high value items at knock down prices.
Unfortunately, due to the economic uncertainty and triple dip recession rumours flying around this year, many retailers have been attempting to offload as much stock as possible before the start of the New Year. In the week before Christmas, it was common to see prices slashed by as much as 80 per cent – a time when, traditionally, prices are kept as high as possible in order to cash in on the last minute festive rush.
Fashion retailers especially will be anxious to get rid of excess stock before the new spring lines hit the shelves early in 2013. There is a high element of competition driving these retailers, as stores which fail to clear “old” stock before the New Year generally post poor full year profits, thus moving further down the food chain.
In the weeks leading up to Christmas, popular high street names such as French Connection, Gap and New Look had dropped prices by as much as 50 per cent, with further slashes in cost emerging as the big day drew closer and closer.
One high street boss, who wished to remain nameless, explained that restricted budgets go a long way in rationalising retailers’ decisions to focus on pre-Christmas sales rather than post-Christmas promotions.
He said; “There are a lot of shoppers who are being realistic about their situation.
“They are making a decision over how much they want to spend and sticking to it – you may get two or three days after Christmas, but you can forget about January.”
This mentality has been backed up by many prominent executives of leading UK stores, as several chains see promotional activity of this type as retaliation against the increasing threat of online shopping. By dropping prices to this extent in the week before Christmas, consumers could be guaranteed a bargain without the risk of their purchases not being delivered in time for wrapping and putting under the tree.
Another executive, who again wished to remain anonymous, believes that these sales are an attempt to draw consumers back onto the high street and turn their backs on the online marketplace.
He said; “What you can see is that retailers are trying to tip customers into making a decision.
“Although some of the offers look sporadic or weak at first, there has been a gradual movement down and eventually that will reach the cut price the vast majority of shoppers want to pay.
“I feel sorry for companies that weren’t planning for this to happen because ten per cent off just does not mean anything anymore.”
Yet even in this cut price battle, some retailers who stuck to their traditional pricing methods have seen a huge leap in sales. John Lewis, for example, managed to post two consecutive weeks of record sales takings in the weeks leading up to Christmas despite the fact that they only cut prices when their closest competitors do.
Meanwhile, Next also achieved strong sales over the Christmas period and stuck to the tradition of the Boxing Day sale.
However, it remains to be seen whether these retailers will come out on top in the long run as consumers will return to the worry of financial uncertainty as the New Year dawns and Christmas becomes a distant memory.
Partner Tom MacLennan, of business advisory service RSM Tenon, believes that a sharp fall in spending will be ushered in with the bells tomorrow night.
He says; “There is more of a fear among retailers of being left with stock after Christmas this year because disposable income for many families has dropped.
“People want to have a good Christmas Day, but January for many families will be about belt tightening.
“In some areas people are still concerned about their jobs – no one wants to be left in hock.”
Do you think the double dip recession in the UK has changed the face of retailing in the UK forever – even to the extent that Christmas and New Year sales can no longer be relied upon to be popular? Should these stores have held off on major sales until the New Year so they could have a positive start to 2013, or will consumers vacate the high street as soon as the festive spirit has passed?
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