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    December 2008
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Consumers fight retailers in a war of attrition

Posted by guesto on December 24, 2008

As I speed-shopped around Carnaby, Regent and Oxford street on Saturday, I couldn’t help but feel like I was in a war of attrition with Diesel and Ted Baker.

I really really need a new pair of jeans and a new jumper – even to the extent that I have embarrasing holes appearing in my current threads. I’m hardly a pauper, so I should not allow myself to get in such a state, but I KNOW that there are big sales coming, and I don’t want to pay £100 for a pair of jeans that are going to be £50 in a few week’s time.

And I’m clearly not the only one thinking this way, as consumers come to expect retailers to start their discounting earlier and earlier. The more people do this, the more desperate the retailers become and the bigger the discounts offered.

The trend of sales starting earlier is not a new one. I remember when “January Sales” meant just that – sales that started in January, once Christmas is out of the way. That seems a distant memory now with all but a few sales now starting on Boxing Day or the day after.

Retailers have inadvertently set this expectation for consumers now, with Hitwise reporting that there were almost as many searches for “boxing day sale” in 2007 as there were for “January Sale”, suggesting a key shift in consumer perception. Boxing day is also now the highest-traffic day of the year for most retailers, as the following Hitwise chart shows.

This year there have been rumours of retailers offering up tp 75% discounts from Christmas Eve – which offers excellent value to consumers, but surely destroys retailer’s profit margin as they pursue short term cash flow.

So what can retailers do in response to this trend?

Flash sales
Flash sales – one day store-wide discounts have been on the high street for several years now, albeit in a fairly understated way. 2008 has been the year when M&S and Debenhams in particular hit the headlines by offering 20% discount across almost their whole range for specific days only. This is quite a good move when you think about it, as it gives consumers their fix for a bargain to keep the cash flow coming, but limits the exposure to a few days that would probably otherwise be quiet anyway.

Sneak previews
John Lewis have pre-launched their last few sales online and offered a sneak preview by email. While this does announce to their competitors what some of their deals are and exposes them to price matching, it also gives them a chance to speak to consumers early and communicate their deals before they get lost in the noise of everyone else’s. Maybe they are inadvertently encouraging shoppers to hold-off purchases even more – but perhaps they would do anyway?

Online only sales
Hot in my inbox is an email from M&S announcing that their sale is starting on Christmas Day! But online only. This is actually a great idea, because it allows consumers to keep shopping and gets their products bought first, while nobody except a probably IT support team need to be in and working until a few days later.

And then of course there are discount vouchers. Now distributed more widely online than ever before. These also give the consumer the perception that they are getting a bargain to entice them to shop more, but again limit the retailer’s exposure by being time limited or even limited run.

Who will win the war of attrition?
Consumers need to buy food, presents and clothe themselves, but with a shortfall in credit I think it is the retailers that need to buckle first, because unless the cash keeps flowing through the checkouts, they will struggle to pay wages and debts and end up going the way of Woolworths.

CONSUMERS OF THE UK UNITE! and let’s force them into giving us a good deal. I’m going to start now by ditching this post and getting down the west end.

Happy Christmas!


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