Heavy discounting on the high street is doing little to bolster some UK retail sectors – suggesting that new sales strategies are required to weather the downturn, argues Victoria Montgomery, of TNS Retail & Shopper.
The UK’s clothing market has been declining steadily since April last year and this looks set to continue – impacting many of the multiple grocers who have focused efforts on enhancing their offer in this sector in recent years.
The trend we are witnessing is an interesting one where, against the backdrop of an increasingly unstable retail landscape, sales and promotions seem to be having little or no effect. Despite very visible sales and promotions leading up to the Christmas and New Year period, shoppers continued to cut back with total clothing sales shrinking by 2% over the last six months.
This may have been exacerbated by the fact that the shift outside traditional discounting periods has resulted in a state of confusion in the shopper mindset, made worse by the rapidly fluctuating economy.
TNS Worldpanel Fashion research has revealed womenswear to be particularly badly hit, with unit sales down 3% over the last six months. Although sales of discounted clothing items were slightly up pre-Christmas, the steady decline in the sale of full priced items offset any positive gain the overall market might have seen – demonstrating that discounting is not having the desired effect.
Interestingly for retailers considering which marketing strategies to employ for the usually buoyant youth market, younger consumers are paying very little attention to the sales. We have found that 16- to 35-year-olds spent only 25% of their total clothing budget on discounted items over the last year, down from 27% in 2007. The figures suggest that the recession has done little to encourage younger shoppers to spend their money in the sales, although consumers above the age of 35 are spending more of their budget on discounted items than they were a year ago – pointing to a more recession savvy older shopper.
The average price of discounted clothes has risen quite significantly over the last year, with the average price of a discounted item of womenswear up by 7% and menswear up by 3%. In contrast, full priced items are now less expensive than they were a year ago. This means that although retailers are advertising up to 70% off, they are actually not discounting as much as they were during the same period last year – a surprising and concerning revelation.
By offering discounts for shorter periods, at a higher frequency, and by not reducing their prices as much as shoppers expect, retailers appear to be putting shoppers off. However, if the hard discounting model is anything to go buy, there is potential for those prepared to offer real value.
Major discount retailers in fashion and food are showing good growth – Peacock and Primark recently reported like-for-like growth of 8% and 5% respectively, and within food retailing hard discounters like Aldi and Lidl are benefiting from increased footfall as they attempt to educate the nation that they need not compromise on quality to cut back on their grocery spend.
There is no doubt that shoppers are looking to save money and compromise on certain lifestyle choices. Perhaps the discounters are becoming more appealing to those who had previously deemed such outlets out-of-bounds, and are being taken by surprise by what is on offer to them.
The challenge for the major multiples and the high street will be how to respond to the price war – the savvy retailers will be considering how to compete against the discounters, but will also be thinking about the long term, bigger picture and the need to build, not erode brand equity. It may be that in the current climate, the answer for mainstream retailers is to move away from trying to compete with the hard discounters on a price level and instead focus their efforts on increasing margins on full priced items.
