With 63% of UK consumers admitting they need to be ‘very careful’ with their money and 40% cutting down on any ‘frivolous’ spending this Christmas due to Covid-related issues, retailers have been forced into early and profound discounting to try and drive sales.
According to the latest British Retail Consortium (BRC) shop price index in association with Nielsen, shop prices fell by 1.8% in November compared to a 1.2% decline in October. This is below the 12- and 6-month average price decreases of 1.3% and 1.5%, respectively.
Black Friday and Cyber Monday have also seen particularly large discounts being applied, according to separate date from RetailMeNot, which says that the levels of price cuts seen over that weekend are also likely to continue in the run up to Christmas.
According to BRC-Nielsen, non-food prices fell by 3.7% in November compared to a decline of 2.7% in October. This is below the 12- and 6-month average price declines of 2.8% and 3.2%, respectively.
Food inflation inched to 1.3% in November up from 1.2% in October. This is below the 12-month average price increase of 1.4%, but in line with the 6-month average price increase of 1.3%.
Helen Dickinson OBE, Chief Executive, British Retail Consortium, comments: “As we approach Christmas, consumers will be glad to see another month of falling prices. This was mainly driven by non-food products, where prices have fallen at a much quicker rate than the previous month. Where demand was weak for some products, discounting has followed, with many retailers trying to encourage more consumer spending, particularly those selling fashion and DIY goods. Meanwhile, food inflation remains low, but we anticipate upward pressures on food prices once the UK-EU transition period ends.”
She adds: “It has been an extremely challenging year with two pro-longed periods of forced closures for parts of the industry. Those shuttered during lockdown have lost billions in sales and many are now in a precarious financial position. The Government must not subject these businesses to a return to full business rates liability from April 2021, and they must urgently consider extending the moratorium on debt enforcement beyond January. Without such interventions, we will see countless more store closures and job losses, deepening the crisis on our high streets.”
Mike Watkins, Head of Retailer and Business Insight, Nielsen, says: “Shop price inflation remains low in food with supermarkets competing for the wallet of the Christmas shopper when sales of seasonal food and drink increased at the end of November. However for non food retailers, the industry faced the challenges of further lockdowns and predicting the levels of demand for online, so it’s not a surprise to see price deflation accelerate, considering the uncertainty around consumer sentiment.”
According to RetailMeNot’s analysis of what was sold and for how much across the ‘Cyber weekend’, Black Friday saw similar levels of discounting to 2019, however it started much earlier and is set to continue for many weeks.
In a statement is said: “After early season growth in holiday messaging, fewer retailers had Black Friday related offers starting in the Sunday-Wednesday before Thanksgiving YoY. However, in line with 2019, many of these offers will last beyond Black Friday, and a greater percentage will end on the Tuesday & Wednesday after Cyber Monday YoY.”
Continuing prior year trends, Black Friday was a crescendo after weeks of strong savings, says RetailMeNot. According to its data, fewer retailers launched Black Friday deals on the date itself after starting offers earlier in the week and the week before. Discount depth was in line with prior year, but there was greater availability of codes and free shipping deals as retailers focused promotional efforts online.
RetailMeNot found that typically discounts averaged out at 22% off the full list price, compared to last year’s average of 23%. Make up and skincare saw 25% reductions this year, compared to 21% in 2019, while handbags were at 27% (25% last year) and computers discounting at around 20% (14% last year).
Clothing and activewear held up well, seeing only 18% and 21% discounts, compared to 15% and 20% in 2019. The largest discounting was seen in photo services which averaged 43% price cuts this year compared to 38% last.
The company says: “For retailers who offered lower quality deals YoY, this was majority driven by reductions in CBO investment, shifts from codes to sales, reductions in instore offer availability, and higher thresholds for discounts and free shipping deals. Many of these top accounts launched promotions earlier in the season, however, so overall savings options for consumers remain strong.”