Buying Sales...

The Office of National Statistics (ONS) official sales figures were released last week and beat many economists predictions. With a 1% increase in like for like sales, this was the strongest monthly increase since 2016 and led many to proclaim that retail was bouncing back after a torrid 6 month

Buying Sales...

The Office of National Statistics (ONS) official sales figures were released last week and beat many economists predictions.

With a 1% increase in like for like sales, this was the strongest monthly increase since 2016 and led many to proclaim that retail was bouncing back after a torrid 6 month period.

This performance shows a strong improvement from December which was down 0.7% on the same index after sales were pulled forward by Black Friday.

The uplift in performance for this period across retail is being driven by strong clothing sales, with consumers seemingly happy to open their wallets to fill their wardrobes.

But are these results a sign that the high street is indeed bouncing back and in a stronger position than anyone has believed for months or is there something else hidden in these numbers that points to a more troubling problem?

The ONS hinted at an underlying problem in their official statement, "Clothing stores saw strong sales, luring consumers with price reductions.”

Many retailers have in this period been buying sales through heavy discounting and whilst this approach is convincing consumers to splash the cash, despite weak levels of consumer confidence, before the expected fiscal pain of Brexit - is it simply a sticking plaster solution to the problem?

We monitor the product collections of over 150 brands and retailers at Mallzee Insights to help power our consumer shopping apps and our product testing solution.

This data makes for grim reading for the corresponding timeframe.

Of the 159,564 products that we tracked in January, 47.67% were discounted. When split by gender womenswear retailers are discounting 47.5% of their products, whilst menswear retailers are discounting 48.1% of products.

Whilst you expect retailers to discount at the end of the season this level is significantly higher than a year ago when the numbers sat at 43%.

Short term this heavy discounting strategy helps to lift consumer confidence and provides a helpful balance sheet boost ahead of quarterly rent bills at the start of March but long term it’s likely to be very damaging.

Discounting in this manner conditions consumers to become more price conscious and ensures they expect further discounts in the future. Internally when a retail team gets hooked on the short term sales boost that discounting can drive it’s very hard to shake this approach and maintain focus on driving up the full price sell-through rate.

British stalwart Jaeger fell into this trap and met an untimely end in 2018 when they fell into administration after being caught up in a continuous discounting spiral that saw stock discounted by up to 70%.

Therefore whilst it’s great to see retail figures rise at their best rate since 2016 I only hope the strategy underpinning it isn’t a further nail in the coffin of some of our best-loved retail brands.

Mallzee Insights helps brands and retailers make better stock decisions using pre release product testing to avoid costly over and under stock positions. Mallzee Insights is powered by Mallzee, the UKs leading non-retailer shopping app with over 1.5 million users and 500 million plus, customer opinions generated on over 3 million products.  

Tags: Retail, Profits

Cally Russell

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