UK consumers are benefiting from record levels of pre-Christmas discounting in 2018, according to analysis of more than 800,000 products by Deloitte.
Retail discounts currently average 43.6%, more than 0.3% deeper than those seen two years ago. By Christmas Eve, average retail discounts could rise to 48%, a new record.
An over-supply of unwanted stock, caused in part by the mild winter weather, has driven retailers to record levels of discounting for products in the run up to Christmas. In addition, varying levels of success of promotional events such as Black Friday, as well as general economic and business uncertainty, have encouraged retailers to slash prices in order to shift unsold stock.
Deloitte’s MarkdownEdge analysis has found that there is already a very wide spread of discounts across the retail market, with discounts ranging from less than 2% to over 80%. These will continue to grow in number and size, with average discounts of more than 52% anticipated from Boxing Day onwards.
Jason Gordon, lead consumer analytics partner at Deloitte, commented:
“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.
“On the one hand, deeper discounting is clearly good news for consumers, but at the same time retailers are seeing margins eroded, significantly for some, at a time when sales volumes should be peaking.
“Against a backdrop of considerable business uncertainty across the sector, many retailers will extend their Christmas sales deep into January, with some having little option but to run through early February and even beyond. While this is unprecedented, it will not be a surprise.”
Fashion victim of mild winter weather
Deloitte has also conducted further research into the UK’s fashion and luxury market. According to analysis from Deloitte’s BenchMarquepricing analytics tool, certain lines of clothing, such as blazers and dresses, saw one fifth of products reduce to half price in 2017. Retailers could double the volume of luxury products being discounted to up to half price from Boxing Day this year in an attempt to clear out winter lines ahead of the incoming season.
The expected increase in discounting comes despite the UK fashion and luxury market largely resisting heavy discounting during November’s Black Friday weekend, which saw discounts of 2-3% compared to up to 40% in the US. This was consistent across categories, with blouses and tunics (0.5% vs 21%), luxury t-shirts (0.5% vs 12%) and blazers (2.3% vs 11.7%) showing the same difference across the UK and US markets.
The analysis also revealed that London remains a popular destination for luxury tourism, particularly for Asian tourists. The UK capital continues to bridge the price-gap against other major European fashion capitals. For instance, a luxury handbag purchased in Rome or Paris is currently only 5% cheaper than one purchased in London, the equivalent of around $50 for a typical Asian tourist.
Thomas McKenna, global lead for BenchMarque at Deloitte, commented: “Like general retailers, fashion brands have also lined up higher levels of stock than last year, which could lead to deeper discounts for many fashion items. Having a good grasp of price points will enable fashion and luxury retailers to adapt to consumer demand and maximise margins.
“London remains a standout destination for luxury tourism. With potential market uncertainties, currency fluctuations will continue play a big role this Christmas for foreign tourists. This could make luxury shopping in London an even more memorable experience.”