Retailers in the UK are facing a nightmare scenario this Christmas according to the British Retail Consortium (BRC). They have been cutting prices in a desperate attempt to generate sales but the public just aren't buying.
Fears of unemployment and rising costs (for example there is a real possibility energy costs will rise by as much as 60%) are causing consumers to hang on tightly to their disposable cash. Add to that fears of pensions shrinking and lo and you start to see why people are not spending despite the 'good news' story on falling prices.
Mike Watkins, Senior Manager, Retailer Services, Nielsen comments, “Non food prices remain lower than a year ago but many shoppers are still reluctant to spend on higher ticket items despite VAT reductions.”
The picture on food sales is similar but may be more successful in generating sales in the lead up to Christmas as food is more of an essential purchase.
Stephen Robertson, British Retail Consortium Director General, said, "Overall shop prices are down on a year ago for the second month in a row. Prices for non-food goods have been deflationary for ten consecutive months now with clothing, electricals and furniture showing the biggest falls as retailers discount to generate sales.
"Fresh food inflation fell to its lowest level since the index began in 2005 - a dramatic contrast with a year ago. Shop prices for some manufactured foods increased more quickly than last month as big increases in the world prices of sugar and cocoa pushed up costs but this wasn't enough to affect overall shop price inflation.
"Generally, lower prices are likely to go on helping households in the run up to Christmas."
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British Retail Consortium