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Cyber Monday price cuts fuel fastest shop price deflation for at least seven years

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Online Cyber Monday price cuts played a part as store retail prices fell at their sharpest rate for at least seven years in the run up to Christmas, new British Retail Consortium figures suggest.

Shop prices fell by 0.8% in December, the eighth consecutive month of deflation, according to today’s BRC-Nielsen Shop Price Index for December 2013. By contrast, prices fell by 0.3% the previous month, November.

The index does not monitor online prices but, said the BRC index commentary, the move by retailers to match online price cuts in-store around Cyber Monday “was a factor in the record-low deflation rate in December.” Cyber Monday is the first Monday in December and in recent years has been the peak date for pre-Christmas internet shopping.

The figures, which include a slowing of food inflation to 1.7% from 2.3% the previous month and non-food deflation of 2.3% in December from 2% in November, represent the lowest inflation rate since the index was first compiled, said Helen Dickinson, director general of the BRC.

She said the rate reflected pre-Christmas discounting of books, entertainment and home improvement products as retailers sought to win trade. “It’s worth noting,” she added,”that Cyber Monday fell in the period covered by the index so discounting was particularly commonplace with many retailers offering to match or beat offers found elsewhere.”

Mike Watkins, head of retailer and business insight at Nielsen, said: “With the continuation of price cuts and promotions across all of retailing and with many shoppers holding back on shopping to the last week, there will have been bargains and some great savings for the savvy Christmas shopper.”

But while shoppers may have been cheered by lower prices the move came at the expense of profits, said the BRC. Its commentary said: “Weak trading performance in the lead-up to Christmas led to above-normal levels of promotional activity as retailers fought over market share. While inflationary pressure in the supply chain remains benign, deep and widespread discounts have come at the expenses of profit margins.”

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