Tuesday 17 December 2019 6:30 am

Why high street discounts are a dangerous drug

Retailers love to brag about breaking records, but one they won’t be cheering this Christmas is the prediction that price cuts could potentially top 50 per cent for the first time ever.

Amid a fierce fight to woo last-minute shoppers into their stores, high street chains are once again turning to a festive sales bonanza over the crucial trading period.

Read more: High street sales plunged the week before Black Friday

New data from Big Four accountancy firm Deloitte suggests that discounting this Christmas will be deeper than previous years: average pre-Christmas discounting has already reached a record 43.8 per cent this December, while Christmas Eve price-slashing is expected to exceed 50 per cent.

After a year of rising costs, waning consumer spending and growing competition, retailers can at least cheer the fact that they now have some political clarity and an improved exchange rate.

But current levels of discounting tell us that many bricks and mortar firms are still increasingly desperate to capture our attention.

And yet by making us more offers, retailers not only risk sacrificing their profit margins but also their reputation. “If one continues to pull that pricing level increasingly deep every year, that’s a difficult trend to turn around,” said Deloitte partner Jason Gordon.

Such activity seems particularly apparent in mid-market apparel, Gordon said, with fashion chains caught in between budget and high-end rivals as they look to make their mark with big red Sale signs.

Mid-market clothing, already discounted 30 per cent, could see reductions averaging 55 per cent by Boxing Day.

There are of course a number of retail groups that have resisted the temptation to discount — last week Superdry boss Julian Dunkerton blasted the “madness” of blanket Black Friday discounting.

It is also true that pricing is not the be-all-and-end-all of a retailer’s success — product quality, personalisation and store experience are all levers that can be turned in times of difficulty.

Reads more: Insolvency firm warns retail carnage will continue

But as the high street heads for what is set to be its steepest Yuletide discounting, the question arises: just how deep can these retailers afford to go?

Main image: Getty

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

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