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A tale of two Sale strategies

So Christmas has put retailers firmly into two camps: winners and losers. No surprise there then but what did effect did the pre-Christmas discounting have on profits and what is the potential fall out for January trading which is traditionally motored by bargain hunters?

Certainly those retailers that discounted early but at lower levels will have benefited on the margin front but some are reporting that their Sale lost momentum immediately after the Boxing Day rush. The difficulty now is how much margin they will ultimately have to sacrifice to clear their remaining stocks and tempt shoppers back out bargain hunting for the rest of this month. To quote one retailer I spoke to this week, “Performance to January 15 will be absolutely crucial. It’s frightening.”

Today JJB Sports slashed a massive 90% of prices while Debenhams upped the ante, increasing its post-Christmas discounts from 50% to 70% (see our news story.)

Another retailer gleefully shared with me he had pulled in like-for-like uplifts of nearly 10% in the Christmas and Sale fortnight but conceded that margins were depleted and profits would be flat on last year.

Meanwhile, those who didn’t break ranks and cut prices pre-Christmas claim theirs was the right strategy but what they sacrificed to their on-Sale rivals in December sales is now being made up with stock at bigger discounts than the pre-Christmas Sale pack. However these “hold firm” retailers’ Sale performance does anecdotally appear to have been sustained through the New Year period and this week.

It seems in terms of overall performance both Sale strategies were much of a muchness but while newspapers headlines screamed of the best Sale period ever, the underlying effect of discounting on profits is the real measure of performance this Christmas.

See this weeks’ Drapers for more on this issue

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