As Christmas approaches, retailers are hoping that the subdued consumer spending of late will pick up, allowing them to increase profits and guard the bottom line. Fortunately, it appears that the Christmas trading season has gotten off to a good start, with October seeing the end of stagnant and falling sales.
During the month, sales volumes crept up by 0.8 per cent according to the Office for National Statistics (ONS). This has done a lot to improve the confidence of retailers, which was decidedly dampened due to a fall of 0.4 per cent in September.
Furthermore, when taken on a year on year basis, total sales climbed by 4.3 per cent compared to the same month last year, with household goods performing particularly well having achieved double digit growth. However, the ensuing mild weather conditions continue to pile pressure upon fashion retailers – although the 0.5 per cent growth in clothing sales were decidedly better than the 6 per cent plunge experienced in September, they remain relatively stagnant for this time of year.
Retail managing director at Lloyds Bank’s commercial banking division, Keith Richardson, says; “A buoyant housing market ensured a strong demand for big ticket items such as furniture and electrical goods.
“The growing demand for Halloween themed costumes and merchandise also provided a boost for retailers.”
Industry analysts have voiced their pleasure at the results, as October’s comparably strong levels of sales have beaten expectations. Economists had predicted that sales would rise by just 0.3 per cent on a monthly basis and by 3.8 per cent year on year, making this result very welcome for retailers concerned about the current economic conditions’ impact upon trading.
In part, analysts believe that the strong performance was due to the levels of promotional activity undertaken by retailers during the month, as October brought some of the deepest discounts seen in more than a decade. According to the ONS, shop prices on the High Street fell by 1.5 per cent when compared to the same period last year, marking the joint largest fall seen since December 2002.
Unfortunately, while this is excellent news for consumers looking to save cash ahead of the Christmas rush, the requirement to discount heavily in order to shift stock is likely to take its toll upon retailers.
Mr Richardson continues; “While heavy discounting and lower prices have benefited shoppers, the ongoing reduction in the value of goods sold is likely to depress total retail sales as we head into 2015.”
The supermarket price war has played a huge part in this overall shop price deflation, as during October food prices were pushed down for the second month in a row. Unfortunately, though, this technique does not seem to be working for the Big Four, as figures from Kantar Worldpanel showed a further narrowing of the gap in market share between the nation’s largest supermarket chains and imported discount brands Aldi and Lidl.
With the cost of everything from food to fuel dropping, consumers are bound to bag a few bargains this Christmas.
Do you think retailers are now expected to offer discounts before Christmas, rather than waiting for the traditional Boxing Day sales launch?
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