In the last full week before Christmas shops are dangling discounts to lure shoppers but the savvy retailers are better prepared than 2004 for a poor trading environment.
M&S has got 35% less stock than last year – some £1.3bn of merchandise that will not be sitting on the shelves in the January sales – which gives them the confidence to keep profit margins at normal levels while still offering a wide range of three for two offers. The strategy is working well for M&S and affords them the luxury of not opening on Boxing Day this year.
Such offers differ from the desperate sales measures of 2004 because they were carefully planned promotions that took into account the likely trading pattern for Christmas which, in keeping with the rest of the year, will be subdued as retailers struggle with rising costs and a slowdown in consumer spending.
Latest figures show a slight blip in November sales but the overall picture is of growth of just over 2% compared with 5.6% at this time last year. The scenario is reinforced by Footfall, which has just reported that the number of shoppers visiting high streets in the UK this week is nearly 10% down on last year.
However, visits to department stores are holding up well as people slip into the one-stop shop mentality. The shortage of department stores in Brighton & Hove is a serious setback at Christmas when retail centres compete for the consumer’s biggest shopping expeditions of the year. The plethora of small independent shops compensates for the lack of department stores to an extent but many of them lack the EPoS systems that allow them to track sales and maximise profitability through clever stock manipulation.
The second poor Christmas in a row may be more than some can bear, espcially when 2006 promises to be little better than 2005.
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