Summer sales earlier with bigger discounts – but is this the end of the bargains?

Data from Ernst & Young, the professional services group, show that retailers this year launched sales on average more than 10 days earlier than last year. Also price cuts of 50 – 75% are commonplace as many retailers have had ‘promotions’ on since Christmas and are having to offer even bigger discounts.

However, is the period of consumer bargains about to end?

“…. enjoy it while it lasts,” said Neil Saunders, consulting director at Verdict, the retail research group. “This may be the final fling for the consumer for hefty discounts.”

Retailers face higher costs for the Autumn ranges, with a VAT increase scheduled for the middle of this year’s winter sales period. Since many also pay dollars for goods from the Far East, a slumping pound has further increased their purchase costs. Although there has been some recovery in the pound it is still worth 20% less than a year ago. i.e. an item priced at $2 cost £1 in July 2008 but costs £1.21 in July 2009. Against the Euro the Pound has fared a little better recovering to 92% of it’s rate a year ago.

Will retailers need to factor in the VAT increase to 17.5% from Jan 1st 2010 or will it be a case of unsold Winter stock by that time will already be in the sale? Will you need to look at pricing regular lines differently to seasonal ranges? All in all, it’s a bit of a mess which I don’t think the Government really thought through with their ‘knee jerk’ reaction to  the downturn.

I suspect that as most retailers ordered their Autumn/Winter merchandise during the ‘depth of the recession’, that quantities committed to, are ultra cautious.  It’s probable that there will be much less surplus stock which needs to be marked down going forward so this could well be the beginning of the end of the bargains enjoyed by the customer.

From a Retailers point of view – let’s hope so.  As  a consumer – bah humbug!

Tony Heywood – Gilcrest Services Ltd
Retail Troubleshooter
Business Turnaround and Recovery
07905 848 111

p.s. I attended the opening day of the Next sale on Saturday (and no I wasn’t there for the 5 am opening!) and was surprised at how little stock was in the sale. A good 2/3 of the ranges were still at full pricing. Good to see that their acknowledged expertise for stock management is still holding up. So although sales may me down their bottom line should not be impacted as much as their competitors.

One Response to “Summer sales earlier with bigger discounts – but is this the end of the bargains?”

  1. No this is not the end of the bargain, perhaps sales may rise or fall. we are efficient in retail sector.

Leave a Reply

You must be logged in to post a comment.