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Tactical sales drive High Street

News, 22 December 2015

LONDON: Retail sales in the UK have grown less than expected in the run-up to Christmas, a situation that is unlikely to change dramatically this week as many high street retailers start the annual sales period early.

"The economics of retail are changing before our very eyes," according to Richard Hyman, an independent retail analyst. "Digital sales have added additional capacity but haven't added demand," he told the Financial Times.

"Most of the sales we're seeing aren't planned and aren't strategic," he added. "They are tactical responses to competition that only the really strong players with strong brands and price relationships with their customers can avoid."

For the rest, the calendar-led tradition of January and summer end-of-season sales is being replaced by a more immediate assessment of what to do with excess stock levels, particularly in the fashion category.

On some estimates, a minimum discount of 40% is now required before customers start to pay serious attention. Research from consulting firm Deloitte suggests that 41.8% is now the average pre-Christmas discount on older stock and it expects that to rise to 53% after Christmas.

The latest Distributive Trades Survey from the Confederation of British Industry indicated that UK retailers had seen business pick up in December but not by as much as had been hoped.

This reported that 43% of companies polled – including retailers, wholesalers and motor traders – had seen increased sales volumes in December while 24% registered a decline.

The positive balance of +19% was significantly better than the +7% figure that emerged from the November survey, but below an expected figure of +21%.

Consumer confidence, meanwhile is positive: the GfK Consumer Confidence Index for December was up one point to +2.

"This is the first time since the Consumer Confidence Barometer started in 1974 that the Index has remained positive for an entire calendar year," said Joe Staton, head of Market Dynamics at GfK.

Compared to this time last year, the Index showed a significant improvement in consumers' view of their personal financial situation in the coming 12 months, a development helped by falling petrol prices and rising wages.

Data sourced from Financial Times, Reuters, GfK; additional content by Warc staff