'Record levels' of pre-Christmas discounting to attract shoppers

A catalogue of pressures for retailers mean shoppers are benefiting from record levels of pre-Christmas discounting, according to a report.

Business services firm Deloitte issued the update as a growing number of big names - both on the high street and online - warn of the effects of weak trading in the run-up to Brexit as consumer caution dominates.

Deloitte's analysis of 800,000 products showed stores were attempting to kickstart spending with discounts currently averaging almost 44%.

It expected the savings to intensify to a new record of 48% by Christmas Eve next Monday.

The report said retail headwinds also included an over-supply of stock from a mild start to the winter and the resulting markdowns were spread "very wide" across the market.

"These will continue to grow in number and size, with average discounts of more than 52% anticipated from Boxing Day onwards," the research suggested.

Separate figures showed the sector had some way to go to get people to part with their cash.

IHS Markit (Stuttgart: A1139A - news) said its household finance index was at a six-month low in December while Springboard reported high street footfall - a measure of the number of people hitting the shops - being down slightly last week compared to the same period in 2017.

Jason Gordon, Deloitte's lead consumer analytics partner, said: "In recent years consumers have come to expect retailers to heavily discount products in the lead-up to Christmas.

"Christmas falling on a Tuesday, shorter Sunday opening hours and many choosing the weekend prior to Christmas to travel to friends or family will complicate the last few crucial days trading.

"This is why we expect retailers to ramp up their discounting earlier than normal in an attempt to clear stock."

While a race to the bottom on price is good news for shoppers, it signals an erosion in profitability for retailers.

Deloitte said the fashion and luxury sectors were catching up after sluggish Black Friday promotional activity.

ASOS (LSE: ASC.L - news) became the latest big name to warn on performance when it issued an unscheduled trading update on Monday.

Another darling of the fashion sector in recent times, Primark, has reported a "challenging" November while the owner of Sports Direct and House of Fraser, Mike Ashley, has described the month as the worst he's witnessed.

It has been a year of turmoil for the sector - starting with the collapse of Toys R Us and Maplin.

Scores of other chains have either closed stores or been forced to seek rescue deals with landlords to help bring down costs in the face of rent, business rates and minimum wage rises.

Mr Ashley, who bought House of Fraser following its collapse in August, issued a plea to MPs (BSE: MPSLTD.BO - news) early this month to help save the struggling high street.

The tycoon, who also snapped up Evans Cycles, has seen an offer of financial help for Debenhams - in which Sports Direct is the biggest shareholder - turned down.

Deloitte suggested luxury was tipped to be the best-performing sector this Christmas - potentially aided by not only customers immune from belt-tightening but also the weaker pound attracting tourists.