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'Unsustainable' levels of discounting to blame for industry crisis

Retailers have blamed the vicious cycle of discounting for increasingly tough trading conditions on the high street, after the situation was last week said to have reached “crisis” point.

Discounting on the high street credit Alan Cleaver

 

Last week, Drapers exposed just how worried leading figures are about the rising costs of doing business, such as the living wage, the slowing economy, unseasonable weather, concerns over a possible Brexit and changing consumer behaviour.

Responding to the story, retailers – both from multiples and independents – told Drapers “unsustainable” levels of discounting were to blame.

“Trade is very challenging and you don’t want to get dragged into promotion,” said Daniel Rubin, founder and executive chairman of Dune. “However, the reality is, if stock isn’t selling – if it’s not exciting enough for the consumer – you have to promote it to keep it moving and improve cash flow.”

He added: “Our shopper is looking for a real point of difference. We have to invest in design to come up with interesting product – if it’s something she has seen before, she will wait until it is discounted.”

There was “particularly intense” promotional activity on the high street in March, the British Retail Consortium and KPMG said when they released the latest results from their joint retail sales monitor this week.

Despite the price slashing, last month sales of clothing and footwear suffered their steepest decline since September 2014.

Visa Europe’s UK Consumer Spending Index found the amount spent at clothing and footwear retailers declined 1.8% for the three months to the end of March, compared with the same period the year before. The amount spent on entertainment was up 5.6%, and in restaurants and bars spending was 5.3%.

The chief executive of one womenswear multiple blamed the “unpredictability” of trade: “It is a surreal time to be doing business. It used to be simple but there seems to be no rhyme nor reason to shopping patterns and the level of footfall any more.

”So many retailers are discounting because they have issues with cash flow. Trade is much lumpier now and our ability to predict it has become more difficult.”

One young fashion agent observed that trade over the last few months had been “rubbish”: “It is shocking out there. Independents and smaller retailers are really struggling up against the big boys like Asos, who can go on Sale as and when they want to boost traffic.” 

“At last high street chains have realised they have created a customer who is obsessed with discount rather than value,” said the owner of one occasionwear boutique.

“Trying to out-do each other with the lowest prices and constant Sales combined with overstocking and bad buying decisions have eroded the margins of these chains.

”You only need to look at the plight of [department store chain] Beales to see that. Once the previous chief executive took them down that path, the troubles started and a consequent lack of investment has only made it worse.”

He added: “It’s time to start retailing again and concentrate on the core values of a great product, innovation and awesome customer service.”

 

Readers' comments (6)

  • I've been saying this for years. Mismanagement across the board, coupled with short-termism and a naivety that things will get better. A new breed of people are needed in this industry who do things the right way, work with the right people and get things done instead of number players and bean counters.

    All the players who have created this scenario, should no longer be playing and given their P45's.

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  • Never known it so difficult to sell a dress these days. The Internet The brands and the big boys have ruined our industry. The worry for me is we now have a generation who don't know anything other than discount codes and online deals. Where are the cool fashionistas going to shop for the cool brands when all the indies are gone? It's sheer madness.

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  • Played into Amazon's hands following Black Friday. Pure etailers have added to over supply.

    Now limited margins to reinvest. Wait until Amazon do fashion properly. Then things will really shake.

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  • Fab Frocks

    I've commented on this subject many times and after all these years of fighting for customers through discounting it is coming back to bite the high street. Make your bed .......

    Many indies are closing because of retirement as the peak of new openings some years matures. Many more are up for sale with no-one to buy them.

    There are still customers out there who want to shop in boutiques but it is the younger web generation that pose the highest risk to the high street, it's a ticking timebomb.

    There are more options than ever online and independents need to move with it and look at ecommerce. Adapting your business and investing in technology and social media will strengthen your business and also improve customers through the door too.

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  • Retail is changing and it's changing fast so just accept it. There are not two seasons anymore, there are four and each one should be bought for accordingly.
    A change of mentality is required and traditional methods of retailing do not work anymore.
    If brands or products don't reach an acceptable sell through after 90 days, get rid and get fresh stock in to excite the customer.
    Pre collections are a great solution to maintaining profitability allowing retailers to make profit in months that they would traditionally lose money.
    Retailers need to be more analytical and invest in technology that can provide detailed reports to highlight performance.
    It's time to stop complaining, accept the situation and invest in your business.

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  • darren hoggett

    Good previous post. I would go so far to say there are no seasons at all - You have to cover all bases all year round. That does cost and some Indies won't be able to afford that, but it is worth it and they can react better than multiples and department stores who can still have a dated approach to buying.

    One example is you still hear of retailers that refuse to buy short sleeve shirts for the so-called 'Autumn/Winter' season - crazy! We sell lots all year round.

    Post BREXIT - the whingometer - which is usually high in the clothing trade has gone off the scale, but there really is no need for it. Nine times out of ten if a retailer is doing the business, the problem is with them in one or several respects. The money is out there, you just have to constantly adapt your business to the changing times and be ahead of the curve.

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