Retailers Told To End The Bargains

[libitina]

End the bargains, retailers told

Retailers have been warned against becoming stuck in a cycle of heavy discounting after offering an unprecedented level of bargains over Christmas.

Accountancy firm Ernst & Young said the UK was in danger of mirroring the United States where prices have spiralled downwards as rivals fight for a competitive edge.

It published a survey that found the spread of discounting on the high street was higher than ever before, with mark-downs as deep as 80% seen in the post-Christmas sale.

This meant that it was often "difficult to define" when a store was on sale and E&Y said shoppers no longer considered a 50%-off promotion as unusual.

E&Y director of retail Tim Sleep said: "The subdued consumer climate, widespread price deflation and intense competition have led to higher levels of mark-down than ever before.

"Half price offers are no longer considered a deep discount by customers.

"End of season clearance events will always be a part of the retail landscape, but with the difficult trading conditions at the moment, they must be used as part of a robust pricing, ranging and sourcing strategy."

The survey found that different promotional techniques were used across the Christmas trading period, with multi-buys in November giving way to reductions on individual items.

Cuts of 33% off the full selling price were the norm in the run-up to Christmas and averaged around 55% once the Boxing Day clearance sales began.

E&Y added that footwear retailers were the first to go on sale after suffering from unseasonably warm weather and were followed by clothing.

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[CrashBear]

i hope they don't end the bargains, I need to buy some cd's and an ipod soon!

[SarahBell]

I remember in the old days when they had proper sales. You'd have to wait til January though.

Mind you the shops weren't open on sundays then....

[Jason]

This makes me laugh.

End the bargains? What happens to inflation?

I'm sure retailers would prefer to go out of bussiness than not have discounts!

[Realistbear]

Retailer A to Retailer B--"you first"

[Mushroom]

So easy to give advice from the sidelines and with, I assume, a safe position and salary.

Meanwhile "on the shopfloor" you've got to shift stuff, get those daily, weekly and monthly targets.

Mind, how many retailers are "treading water"?

[FTBagain]

The promotions will only stop when the competition has eased. That means more bankruptcies and job losses. With raw material costs rising and consumer spending slowing there will be a huge squeaze on costs. For costs read jobs!

Has people loose their jobs and see others loose their jobs the spending will slow further. This is turning into a serious recession.

[jonpo]

I really think this is the probably the most important news item ive ever read. this is a sign of things to come. and it does not bode well.

what does it tell us ?

deflation is clearly felt to be a risk.

pay off your debts. cash will be king in the new deflation.

[Bingley Bloke]

Hmmm. So retailers put their prices back up and the consumers don't like it and decide to hold out for the next sale before buying anything. When the next sale comes they all rush to the shops but many miss out because of the sheer quantity of people. Then something strange happens! After realising that they can do perfectly well without the thing they missed out on in the sale, they decide that they really don't need it at all, and never buy it again.

*Sits back and watches*

[Time to raise the rents.]

I was in the shop the other day picking up a few necessities & noticed the lines. It hit me that we're just a bunch of hunter gatherers. The more they put out to hunt, the more we go out & hunt if you get my metaphor.

Some hunters can't work out when they've had their fill though & just keep racking up the debts, proudly bringing their kill home.

As much as you lot will hate me for saying it, I am also a hunter & gatherer, but my hunt has been for a higher passive income, hence the BTL portfolio. Make that your hunt (a passive income stream) & you'll benefit from the gathering as I have.

[Guest Charlie The Tramp]

It hit me that we're just a bunch of hunter gatherers. The more they put out to hunt, the more we go out & hunt if you get my metaphor.

It all goes back to our days in the hunter-gatherer environment. A hunter who wanted a balanced diet would have to swap meat for berries, for example, but would have an inflated sense of value of what he owned-meat.

The difference today TTRTR they exchange their meat for massive debt.

[Guest Bart of Darkness]

I'm sure retailers would prefer to go out of bussiness than not have discounts!

MFI certainly seem to be heading down that road.

[The Masked Tulip]

There's lot of inflation in the UK - tried getting to see a Dentist lately? How about that private knee op to jump the never-ending waiting list? Used a solicitor recently? Things from China are keep but UK services are rising, add commodities like oil and HPs then inflation is on the up in the UK and has been for some time.

[sign_of_the_times]

I was in the shop the other day picking up a few necessities & noticed the lines. It hit me that we're just a bunch of hunter gatherers. The more they put out to hunt, the more we go out & hunt if you get my metaphor.

Some hunters can't work out when they've had their fill though & just keep racking up the debts, proudly bringing their kill home.

As much as you lot will hate me for saying it, I am also a hunter & gatherer, but my hunt has been for a higher passive income, hence the BTL portfolio. Make that your hunt (a passive income stream) & you'll benefit from the gathering as I have.

I've always seen you as a hunt

[BuyingBear]

The only way retailers have been able to maintain revenue is by discounting and cutting margins and increasing volumes, often they've managed to pass this down the supply chain as the price of manufactured goods from China has been falling. i.e. You walk out of the shop with more guff for exactly the same money.

However, unless China can produce goods for less than the raw materials and shipping then this formula is obviously totally unsustainable, it's already been mentioned that the real cost of labour isn't reflected in the final price, companies in China are often simply kept open via dodgy loans from state banks, this allows them to operate and maintain jobs to quell civil unrest, we don't see the real cost.

Customers need to Stop Trying To Be Clever! and pay way over the odds for goods as the price of maintaining shops, a supply chain and staffing in the UK is greater than the cost of the manufactured goods themselves.

The real kicker for shops will be big increases in rents, council taxes, transport, energy prices when up to 5 year contracts (ouch!) come up for renewal, they can't rely on the continued deflation of goods and higher volumes to get them through this one, then you have the revaluation of the yuan to deal with. Their whole business has been proped up over the past few years based on this 'model' of hyper-inflating running costs being directly offset by falling input costs.

An finite supply of borrowed money from consumers and unrealistic supply side costs are finally catching up with them.

Will MFI be with us next year?

[DavidGold]

Galbraith wrote something along the lines of competion can be self-destructive as regards quantity and price. (Witness mortgage lenders devising ever more risky products for poor quality borrowers.) Even Tesco is feeling the pinch of higher labour costs and lower retail prices. The Bank of England is treading a tight-rope between rising inflation when the marginal companies go bust / give up competing for market share on the one hand, and deflation on the other if this gets well and truly ingrained in the consumer psyche.

[Tempest]

QUOTE

End the bargains, house sellers told

Sellers have been warned against becoming stuck in a cycle of heavy house price discounting after offering an unprecedented level of bargains over the first few months of 2006.

Management consultant firm Blair and Brown said the UK was in danger of mirroring the United States and Australia where prices are spiralling downwards as rivals fight for a competitive edge.

It published a survey that found the spread of discounting up your street was higher than ever before, with mark-downs as deep as 15-20% seen in the post-Christmas debt hangover sale.

This meant that it was often "difficult to define" when a house was on sale and B&B said buyers no longer considered a 10%-off promotion as unusual.

B&B director of debt Tim Sleep said: "The subdued consumer climate, widespread price deflation and intense competition have led to higher levels of mark-down than ever before.

"cut price offers are no longer considered a deep discount by customers.

"End of housing cycle clearance events will always be a part of the HPC landscape, but with the difficult trading conditions at the moment, they must be used as part of a robust pricing, ranging and sourcing strategy."

The survey found that different promotional techniques were used across the new year trading period, with multi-buys by BTLers in November just before the SIPPS U-turn giving way to panicked reductions on individual properties.

Cuts of 13% off the full selling price were the norm.

B&B added that 2 bed BTL flats were the first to go on sale after suffering from unseasonably low yields and high voids.

[Guest Charlie The Tramp]

Galbraith wrote something along the lines of competion can be self-destructive as regards quantity and price.

Very interesting that. I remember when the big electrical warehouses came about in the early seventies,

as an example they would have to sell three fridges to earn the same profit as a small retailer who sold one.

Alas the small retailer was driven out of business by this competition and the big retailer was stuck with the policy of stack them high and sell them cheap.

[BuyingBear]

Alas the small retailer was driven out of business by this competition and the big retailer was stuck with the policy of stack them high and sell them cheap.

Yup, somebody will have to be left out in the cold given the massive over-capacity built by the retail sector in recent years, year on year sales are actually quite respectable in the 6% region I believe but because of all the new capacity their prefered "like for like" sales are basically static.

If companies like Tesco are growing faster than the market then that can only mean one thing for the competition, I think many are holding on by their finger nails expecting rate cuts and further improvements, but one jolt and a whole raft will fall.

[shermanator]

Will MFI be with us next year?

Doubt it. Bear trader Simon Caukwell, aka Evil Knevil, stands to make a lot of money if/when they go under.