Blog: Pre-Christmas discounting damages brands

Petah Marian | 15 December 2011

The traditional Boxing Day sales frenzy seems to have begun earlier this year, with desperate UK retailers trying to grab as many sales as possible before consumers tighten their belts again when the post-Christmas hangover kicks in.

Walking the high streets, some retailers seem to have skipped their Christmas windows and gone straight into January markdowns. Speaking to Supergroup chief executive Julian Dunkerton about the heavy promotional landscape yesterday, he said: "I think they're making a big mistake", in launching their sales before Christmas.

"There is a lot of discounting going on and we don't do that. If you have got it right, sales are OK to good. But I don't think it is brilliant for anybody."

Unseasonably warm weather has slowed the sale of traditional winter products like coats, scarves and gloves, which may have given some retailers the heebie jeebies that the entire Christmas period is at risk. However, discounting too soon means that retailers will see margins hit during a time of year when consumers ordinarily expect, and tend to be willing to pay full price.

Speaking about retailers going into sales before Christmas, Dunkerton said: "People don't want to buy gifts on sale. It perceptually doesn't feel right."

Certainly, as a consumer, over the past couple of years, there are certain brands I've learned that if I wait, they will invariably go on sale. And with websites promoting when different retailers are planning to go on sale, savvy shoppers may hold off their final Christmas shopping in the hope of getting a bargain. Unfortunately, this changing mindset is unfortunately unlikely to disappear when the economy eventually picks up.

Planet Retail's global research director Natalie Berg said that retailers like Debenhams and Gap are cutting prices by up to 40% in a bid to get customers into stores, a move which is likely to hit January sales. "With all of this pre-Christmas discounting, there is no incentive for consumers to hold out as they have done in the past. This will certainly lead to retail margin erosion and dilute the appeal of the January sales for many shoppers. Combined with the fact that there will be no pending VAT rise to act as a stimulus to buy bigger-ticket items, it is looking like wallets will remain firmly shut once Christmas has ended," she said.

For retailers and brands looking for good news, it doesn't seem that there is any on the horizon yet.


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