Christmas cheer, but only if you were a shopper

Survey reveals cut-price festive frenzy as retailers tried to fight the economic blues
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The Independent Online

Shoppers enjoyed some of the high street's biggest- ever discounts before and after Christmas, with stores slashing prices by as much as 80 per cent, according to new research.

The survey by accountants Ernst & Young found that the average price reduction before Christmas was 33 per cent, rising to 55 per cent in the period after 25 December.

But it also found that while some discounts were as low as just 10 per cent, other retailers cut their prices by up to 70 per cent in the run-up to Christmas - traditionally one of the most profitable periods for the high street.

"The subdued consumer climate, widespread price deflation and intense competition have led to higher levels of markdown than ever before," said Tim Sleep, the director of retail at the accountancy firm. "Half-price offers are no longer considered a deep discount by customers."

Despite early fears of a tough Christmas, a number of retailers have since reported robust performances. Marks & Spencer revealed a 4.8 per cent climb in underlying sales, while J Sainsbury's sales beat analysts' estimates, rising 5.2 per cent in the 12 weeks to 31 December.

But not all fared so well. Discount retailer Matalan - which revealed last week that its chief executive, John King, was quitting - reported a 5.5 per cent slide, and jeweller Signet suffered a 9.3 per cent slump.

"If you have the right offer at the right price, you can enjoy the luxury of pricing integrity," said Richard Hyman, the chairman of retail consultancy Verdict. "If you are a bit weaker but ahead of the game, you can use some good promotions. But if you're really struggling, you are probably going to have to go on sale, and that's really going to affect your margins."

The survey, published today, also found that the timing and depth of discounts or promotions varied widely across sectors.

Footwear shops were the first to go on sale, followed by clothing. Within that, menswear went on sale later than womenswear.

"It is clear that the concept of a one-size-fits-all pricing strategy is no longer effective," argued Jason Gordon, a pricing specialist at Ernst & Young.

"The key for UK retailers will be to avoid the constant downward approach trend that we have see in the US. In 2006, retailers need to be more analytical in the management of promotions and markdowns."

The survey was conducted between 15 November and 13 January, with prices, promotions and discounts on 500 non-food items monitored at 50 major retailers.

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