Research shows extent of retailers’ promotional strategies throughout 2011.
Cut-price goods now occupy a quarter of high street retail space, with an average discount of more than a third off, according to a detailed study of 23 fashion retailers.
It is the latest evidence to demonstrate the market pressures forcing retailers into strategic discounting and promotions to keep cash flowing, as they battle to protect brands and margins.
Last week, Drapers reported that the current round of high street promotions aimed at kick-starting consumer spending were likely to set the tone for Christmas trading, with retailers including M&S and Bhs discounting by as much as 40%.
The variety of strategic promotions has significantly increased from 2010, with Retailmap’s research showing at least four types of offers featuring as mainstream strategies on the high street. These include spend £X get Y free; spend £X save £Y; spend £X save Y%, with promotions characterised by adding value and making consumers feel they are getting more for their money.
The average space given over to promotion-led goods by retailers has increased 5% on last year. According to RetailMap figures, retailers dedicated an average of 20.2% of store space to promotions last year, while this year it has grown to 25%.
This figure was quoted by M&S chief executive Marc Bolland as he presented the retailer’s half-year figures this week. He admitted that M&S was feeling market pressures to discount and that the good part of the retailer’s good, better, best offer last season was not strong enough. He said the market was more competitive in the “very promotional environment”. He added that discounting at M&S was being led by “adding value” and ensuring quality.
The survey found that discounts of more than a third (37%) were prevalent throughout last year on the high street. This year it has remained steady, falling slightly to 36%.
Retailmap director Richard Fitzpatrick explained that for retailers who feel maintaining the integrity of the brand is critical, simple blanket promotions won’t work in a climate where everyone is discounting.
Fitzpatrick said: “Retailers have to be clever about how they attract customers and also about how they maintain their bottom line in such a promotional environment.”
Jane McNally, chief executive of Irisa Group, which owns womenswear brands Ann Harvey, Eastex, Dash, Minuet and Kaliko and was formerly called Alexon Group, pointed out that what is happening on the high street is effectively “price deflation”. She said: “Retailers are trying different styles of markdown activity to ensure they make a sale.”
For indies, market pressure to discount and competition from the multiples means they are having to be particularly discerning with brands they stock.
Janine O’Keefe, owner of premium womenswear indie O’Keefe in Esher, Surrey, said: “I am quite selective about what brands I sell so I’m not forced to compete with the high street. When I do offer promotions I’m quite strategic about it and will often tie it in with a customer event. I’m very careful to only have actual Sales a couple of times a year.”
Although John Lewis’s Never Knowingly Undersold price policy suggests it would be impacted by widespread competitor promotions, the department store chain said it had no plans to change its customer promise.