Despite retailers’ best efforts to bolster their share of a shrinking market with heavy Christmas discounting, figures seen by Drapers suggest the price cuts didn’t pay off
Shoppers may be hard-pressed to remember the last time they walked into a store to find it empty of discounts or promotions. The ‘January’ Sale started way back in November, when Marks & Spencer led the way with a 20%-off day - its first pre-Christmas promotion in four years.
But it looks like the high street’s promotional frenzy failed to save the day, with retail research firm TNS Worldpanel Fashion revealing that total clothing sales shrank 2% by value and volume over the past six months - and blaming heavy discounting for the fall.
The TNS findings, seen exclusively by Drapers, are in stark contrast to those issued by trade body the British Retail Consortium last week, which said fashion sales in January saw the smallest year-on-year decline for several months but added that sales were largely driven by discounting.
TNS admits that sales of discounted items were marginally up in December, but the 4% drop in the sale of full-priced merchandise by volume offset any positive overall gain.
In fact, younger shoppers aged between 16 and 35 spent a lower proportion of their clothing budget (25%) on discounted items last year than in 2007 (27%), preferring to buy full-price, trend-led items. Their higher disposable incomes would have helped and it came as no surprise that the likes of value chains New Look and Peacocks, and branded young fashion chains Republic, Blue Inc and Cult Clothing, which all lean towards younger shoppers, emerged as winners over Christmas.
The age difference Tim Bettley, managing director of Peacocks, says its strategy to hold off going on Sale before Christmas paid off. “We discounted considerably less in 2008 than the previous year and didn’t go on full Sale until after Christmas - our results speak for themselves,” he says. “Younger customers want the right product and we sold some of our highest-priced items in the run-up to Christmas.”
But older shoppers, who are likely to remember the last recession, went the other way, spending more of their clothing budget (38%) on discounted items in 2008 than in the previous year (33%), according to TNS.
As a result, the middle market fared less well, with like-for-like sales falling 3% at Debenhams and about 7% at M&S over Christmas. Still, if their customers were asking for discounts as the TNS figures show, then didn’t these retailers adopt the correct strategy? As M&S executive chairman Sir Stuart Rose said in response to criticism about its heavy discounting: “It’s about showing you are one of the pack and trying to get your fair share of the pot of gold”.
Elaine Giles, client manager at TNS, admits that pre-Christmas discounting did boost sales for some retailers, but the overall effect was cannibalisation. “Discounting did drive extra volumes for some retailers, which drove overall sales, but heavy, one-day promotions, for example, encourage customers to spend on discounted products when they would have paid full price,” she says.
“In the past, retailers stuck to discounting periods but the credit crunch has left the market in disarray.”
One concessionaire told Drapers that the high street was forced to follow the example of M&S and others, but admits the results may have been more positive if retailers had held their nerve. “Our competitor concessionaires that didn’t discount in the run-up to Christmas suffered in terms of sales compared with those that did, but I don’t know what their profits were,” she said. “But this heavy discounting will set a precedent for next year.”
To make matters worse, TNS says discounting hasn’t been as deep as in previous years. But by contrast, full-price items are cheaper than a year ago. Giles says shallower discounting is a ploy to get customers into stores but is “bound to make [discounting] even more unpopular with consumers in the long run.” Giles adds: “The market looks set to continue its steady decline. [Retailers] either need to consider following their advertising up with real reductions that deliver what they promise, or focus their efforts on increasing their margins on the full-priced items.”
Retailers can still encourage their customers - whatever their age - to buy into full-price items, adds the boss of the concession business, provided they offer something different to last season. “There’s a big temptation to play it safe in a recession, but that’s not actually the safe thing to do,” she says. “If an item is similar to last season’s, then shoppers won’t buy it. And it doesn’t have to be a high-fashion product - people just want to see something extra special.”
- 2% Amount by which total clothing sales in the UK fell by volume and value over the past six months
- 25% Proportion of 16- to 35-year-olds’ clothing budget that was spent on discounted goods in 2008
- 38% Proportion of the 35-plus market’s clothing budget that was spent on discounted goods in 2008
Source: TNS Worldpanel Fashion