Discounts drag down shop prices

Christmas discounts saw shop prices fall at their fastest rate since March 2017, according to new data.

The latest BRC-Nielson Shop Price Index showed that shop prices slid deeper into deflationary territory, falling by 0.6 per cent on a year earlier in December.

This was also a greater decline on the 0.1 per cent decline seen in November.

Non-food prices fell at their fastest rate since January 2017, falling 2.1 per cent year on year, and compared with 1.1 per cent in November.

British Retail Consortium chief executive Helen Dickinson said: “After several months of shop prices teetering on the edge of inflation, December saw them retreat deeper into deflationary territory. Prices in December fell at the fastest rate since March, when only a month earlier we saw the shallowest rate of deflation for four years.

“This is good news for shoppers. Retailers offered lower prices at the beginning of December than last year on many of their non-food ranges, providing welcome options for Christmas shoppers on a stretched budget. These discounts allowed consumers some much-needed breathing room during the festive period at a time when the cost of their food shop is on the rise.

“This year we will continue to press the Government for clarity on the principles and terms around the Brexit transitional arrangements, to ensure businesses have the certainty to plan and invest and that consumers don’t face higher costs or delays from tariffs or onerous customs barriers.”

Mike Watkins, head of retail and business insight at Nielsen, added: “The SPI inflation rate is below other inflationary measures, showing there is little inflationary pressure coming from retailers. With consumer confidence wavering and unpredictable levels of demand, many non-food retailers have been keeping prices low to stimulate spending, which will undoubtedly have come at a cost to margins.”

Salmon’s global head of retail Patrick Munden commented: “The new figures released today paint a mixed picture for retailers and shoppers – better news for the latter, who are cashing in on lower prices offered by retailers concerned that their Black Friday deals would impact their Christmas sales. But this could very much become the norm. Black Friday has now rapidly overtaken the Christmas and New Year sales as the retail bargain event, with many retailers facing the prospect of a quieter December. This shift in peak trading should signal a shift in strategy for many stores, where creating their own ‘peak’ days to differentiate themselves from their competitors might be the solution to bolstering Christmas profits. And all this should of course be done through a multichannel approach, both in a retailer’s physical store and their e-commerce website.

“There are further signs of retailers struggling during this period, too. Figures released this year from Springboard show footfall numbers had dropped over 10 per cent on New Year’s Eve in shops year on year, so retailers need to ensure that they are implementing strategies that keep consumers coming back to spend their money. As well as a reduction in price on many items, employing new forms of in-store technology is another way to keep customers enticed and help retailers increase footfall and sales during difficult periods.”