Big discounts pay off for under pressure UK retailers

UK retailers embarked on an “extraordinary” period of discounting this October as they tried to entice shoppers into making purchases, according to research by the BRC and KPMG.

On a total basis, sales increased by 0.6% in October, against an increase of 1.3% in October 2018. This is the best performance since April and above the three-month average decline of 0.3% and the 12-month average growth of 0.1%, a new record low.

Fashion shops were particularly active, helping non-food return to growth for the first time since July. But with Brexit still unresolved and a December election creating new uncertainties, retailers will be looking nervously at the months ahead.

“Retailers have clearly been peddling hard to win over disengaged shoppers, especially given continued Brexit uncertainty. Aggressive promotion to move stock has seemingly benefited fashion sales, both on the high street and online. However, the jury’s still out on whether that progress will benefit the retailers’ bottom line,” says Paul Martin, UK Head of Retail at KPMG.

Online sales have returned closer to normality, with a 5.1% uptick in October, but growth there remains muted. Fierce focus will be placed on the upcoming Black Friday and Cyber Monday events to kick things into better shape, he adds.

“As trading updates from key retailers makes painfully clear, the line between sales growth and profitability is wafer thin. Increased costs – in some cases including further stockpiling in anticipation of Brexit – will impact margins. It is clear that with an ongoing lack of consumer confidence there is little room to create consumer demand with slashed prices these days,” Martin concludes.