Money Blog: Why the High Street Bloodbath Is Good News for Shoppers
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Home » Money Blog » Money Matters » Why the High Street Bloodbath Is Good News for Shoppers
Why the High Street Bloodbath Is Good News for Shoppers
By Annie Shaw
Nov 20, 01:39 PM
If sex and shopping have been the main preoccupations of the UK population for the past decade or so, at least one of those shared pastimes seems to be coming to an end – and the decline of shopping as a pastime is leading retailers to slash their prices by levels not seen for many years. And with Christmas nearly upon us, it shows how desperate the situation facing the UK retail sector is.
The latest figures from the high street indicate that retail sales fell by 0.1% during October. And some of our biggest names are suffering – today it was revealed that Woolworths is in talks to sell its 800 stores for the nominal sum of just £1.
Fear of unemployment, rising mortgage rates and the tightening of credit are taking their toll in the shopping malls, with latest Office for National Statistics data showing the second successive monthly fall in retail sales.
Granted this was less than the 0.9% drop that was being widely predicted, but the latest fall follows a 0.4% decline in September, and we have to believe the evidence of our own eyes. No one can help noticing that the sales have started early this year, so one can only conclude that retailers themselves don’t believe the outlook is good.
Among the highest-profile retailers to slash prices in a pre-Christmas sale is Marks and Spencer, which today, for one day only, is axing prices by 20%. M&S recently announced a 34% drop in half-year profits, and some of its stores will stay open until midnight tonight to make the most of what they hope will be a single-day splurge.
The move is an attempt to trump Debenhams, which is cutting prices by up to 25% in a three-day sale which started yesterday. Meanwhile, Philip Green’s Arcadia fashion group, which includes Dorothy Perkins, Burton, Wallis and Evans, is also planning to slash its prices in a similar pre-Christmas sale. M&S rival Bhs, which was offering 20% off everything just a week ago, is now cutting prices by as much as 50% on some items.
The massive sell-off of stock is a sign of desperate times. Retailers need to clear their shelves, not only for the usual reason of making space for the new season’s offerings, but also to improve their cashflow.
As credit dries up, some retailers will need to get rid of stock simply to raise cash to pay their rent and their staff. Because they can no longer borrow easily, they need cash now. Those that fail to do so will find themselves at best laying off workers, and at worst closing their doors for the last time.
And, what’s more, credit has also dried up for consumers. While we may not have forsworn our belief in a woman’s right to shoes, the credit crunch has stemmed the flow of cash that allowed us to acquire the boots and baubles that brighten our otherwise dull daily lives.
Larger retailers are also being hit by the withdrawal of credit insurance, which until now they have been able to buy to cover themselves against non-payment of bills by other firms they do business with.
Stores which have lost at least some of their credit insurance include Woolworths, Debenhams, Currys, Focus and Poundstretcher. Loss of cover means that the store chains have to settle invoices on delivery of goods, rather than settling up once they have sold them to customers.
The Chancellor is widely predicted to offer help to small businesses suffering from cashflow problems in his Pre-Budget report next week, but if shoppers stop buying this won’t do any good.
As many consumers batten down the hatches and prepare for a long winter of home-made soup and extra blankets, luring them back into the shops and restaurants is going to be an uphill task.
But, having said that, those still prepared to spend, spend, spend have never had it so good. Figures from the British Retail Consortium show that electrical goods and fashion items are cheaper than they were a year ago, and more price cuts are expected.
Eager spenders can take their pick from luxury cars at two for the price of one, designer fashions at a snip and half-price restaurant meals. Their only problem may be paying off the credit card bill when it drops on the mat – always assuming the bank will still give them a credit card in the first place.
User Comments
Diane Maunder 25 November 2008, 08:07
Hi I think shopping is a habit, I was a shopaholic before this recession, I bought things l did not need, just because shopping was my hobby. l realise now it was so shallow, and such a waste of time and money. l will never go back to that hobby, and if we all change like this the world will be a better place, with so much less waste.
bert 20 November 2008, 20:20
Its all about greed.
The shops are offering such big discounts on already highly inflated prices. 20% or 25% from the stores mentioned is still higher than other stores.
The shops should aim to reduce their profit margins to stay afloat, pay the staff and rent with say about a 5% profit. I know thats what I would do to stay in business.
They are trying to sell stuff that people dont need and at silly prices. It wont work and will only prolong the recession.
GARRY TURNER 20 November 2008, 20:13
GARRY. forget the bad times, live life to the full, your a long time dead, dont listen to bad vibes, be positive its the only way past the gloom.
tanya 20 November 2008, 18:24
hi what i do is just send christmas cards out its the thoughts that come from the heart.
Seun 20 November 2008, 18:15
Christmas is about sharing with people around us, especially those who cannot pay us back. We should try and desist from the habit of buy now and pay later (on persihable goods) which easily depreciate in value. Christmas is about loving one another, because that was the time when our Lord and Saviour was born. As Paul rightly said, it is the thought that counts and not the size of the gift. Compliments of the season to you all!!!
paul 20 November 2008, 17:47
i think if you can not afford it your not ment to have it and if you where ment to have it you would have the cash for it people need to stop spending so much at christmas you know its the thought that counts not how big the present is
hello 20 November 2008, 17:32
this happened because people were buying more they can afford not thinking that.
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