Mag headline: Retailers bank on a cut-price Christmas
The trading window in the run-up to Christmas, including Black Friday and Cyber Monday (25 and 28 November, respectively), is more crucial than ever this year for many fashion businesses.
With consumer confidence at record lows amid a recession and cost of living crisis, as well as volumes of retail sales tapering off in the last few months, it is a nail-biting time for many retailers. The make-or-break “golden quarter” pushed some retailers into early seasonal promotions this November.
Drapers’ Black Friday deal tracker has been documenting early discounting, among them John Lewis and Debenhams, which started month-long Black Friday promotions to boost dwindling sales, shift excess stock and help customers hit by record price inflation, rising interest rates and spiralling energy prices spread the cost of Christmas.
John Lewis launched its Black Friday event on 4 November – two weeks earlier than last year – offering up to 30% off premium women’s and men’s wear to help customers. Debenhams followed suit by launching up to 60% discounts on 9 November.
There was a 78% year-on-year increase in early Black Friday Sales during the first two weeks of November, a tracker of 305 retailers run by ecommerce trade organisation IMRG and IT company Capgemini.
Retailers were also offering deeper discounts than in recent years: etailers Secret Sales and Brand Alley were offering up to 80% off products.
One womenswear multiple described the retail scene as “tough” and behind many retailers’ decisions to discount earlier than previous years.
“Everybody’s scrambling around for market share, trying to use price to stimulate demand,” he said. “And then there’s obviously the externality of the Royal Mail strikes [scheduled for 24, 25, 30 November, 1 and 24 December], so [some retailers] have been doing things earlier than they historically would have done.”
The retail director of a UK bank said: “The general public will still want to spend for Christmas to make sure they have a good time, but because there’s so much stock flying about still, the discounts have been very aggressive, which is why there was an early start in Black Friday Sales. There will be a lot bigger discounts in the run-up to Christmas as well.
“I think overall sales will be fine, but margins and profitability will be severely impacted.”
One UK fashion agent agreed that early start to Black Friday was largely due to stock issues.
“A lot of retailers are having issues with overstock, unfortunately, so everybody’s gone on Sale early,” he said.
With buying decisions made months in advance of stock hitting the shop floors, retailers could not have anticipated the war in Ukraine or the depth of the cost-of-living crisis, energy hikes, soaring inflation and political uncertainty in the UK. Many bought heavily into outerwear, but the exceptionally warm autumn weather has kept consumers away from purchasing new coats and boots, while rising price inflation has put shoppers off of spending on bigger-ticket items [inflation hit a new record high of 11.1% in October]. ADD LINK***
Martin Foster, managing director of leather goods retailer Lakeland Leather, said: “Our outerwear categories have been slow as a result of the mild weather, but I’m sure [sales] will pick up once the cold weather comes in. We are quite fortunate that leather is such a classic material, so we won’t be doing any extra promotions to clear the stock. For any unsold products, we will carry across to next year.
“What’s interesting is that our gilets and lighter outerwear are selling very well – much stronger than normal. We think it might be because people are wearing them at home to save on their heating bills.”
CUT FOR MAG – One partner at a professional services firm said: “The problem is that lots of clothing retailers have prepared for a cold winter but right now we’ve got a warm winter, so they’re not selling the warmer jumpers and coats. Even when it does turn cold, retailers would have bought stock for a certain period of the season and they would have lost some weeks, so they are likely to have some stock surplus depending on whether Spring is delayed or not.” TO HERE
CUT FOR MAG – Meanwhile, activewear brands such as Sweaty Betty, Lounge Underwear and Gymshark opted to start discounting on 10, 14 and 17 November, respectively. Peel Hunt retail analyst John Stevenson told Drapers that 2022 has brought “a switch back” from loungewear and activewear to “formal for both men’s and women’s wear”.
“Dress sales especially have been up significantly,” he said, adding that the demand for occasionwear is inflated as “the first Christmas in two or three years where people can actually go out”, following last year’s celebrations being largely “curtailed by the Omicron variant”. – TO HERE
Ash Siddique, managing director and co-founder of JD Sports Fashion-owned Missy Empire, said the womenswear etailer offered deeper discounts than usual this year in response to customer demand: “We started our annual Pink Friday Sale [a week-long Sale in the run-up to Black Friday] on 18 November. Our Black Friday strategy this year hasn’t changed, but we’re making sure that the value we offer is much better than last year because of the cost-of-living crisis struggles faced by the consumers.
CUT FOR MAG “Consumers are pulling back from high-end purchases and looking for value, quality, longer-lasting product that will help them spend and buy less.
This was echoed by Chris Griffin, CEO of discount etailer Secret Sales: “We’re having a really successful November when sales are up 70% year on year. People still want to buy quality products but are turning towards non-full price [products].”
“Also, the average basket value has also increased by about 15%, which looks like they are planning ahead and budgeting for what they need in the next few months, including Christmas, and buying it in one go.” – TO HERE
Meanwhile, several brands and independent retailers, including womenswear brand Rixo and footwear brand Grenson, refused to take part in Black Friday discounting altogether for reasons ranging from protesting the mass overconsumption of discounted products, to opting to focus on a Boxing Day Sale instead.
Darren Hoggett, CEO and co-owner of independent J&B Menswear in Norwich: “We don’t take part in Black Friday, but it has been a Black month for so many retailers and it’s a sad indictment of how the trade has been this year. Given the current climate, I suspect many retailers and brands will go on Sale [earlier and heavier] in December, too.
“I think people are going to be a lot more cautious this Christmas and even more so in the next two to three years.”
For many, this year’s peak trading period is set to be the “last hurrah” before an exceptionally difficult start to 2023.
One clothing etailer said the peak trading period will likely not be as bad as retailers have predicted: “It’s always positive when in the final quarter of the year – sales will inevitably pick up.
“However, there are difficult times ahead and it will be a tough ride into the New Year with disposable income going down and inflation continuing to rise. I can see some casualties from January onwards.”
Stevenson predicts this year’s Christmas is definitely not cancelled and, although consumers are expected to spend less than last year, the negative impact is far from much bleaker years, such as the global financial crisis of 2008: “Retailer performance at the moment is pretty much in line with expectations – it’s challenging but not disastrously so.
“Ultimately, consumers always back Christmas. It’s an important period for people and they tend to do what they can to make the best of it. Which is why often the predictions of ‘the worst Christmas in 50 years’ and all this stuff never quite comes true.
“Whereas next year, retail is going to find it more challenging as a result of the combination of the full impact of rising interest rates, energy bills and inflation on the consumer, which makes for a sort of tougher backdrop into the first half of the next year.”
After a difficult 2022 marred by the cost of living crisis, political instability, rising energy costs and record-high inflation, there is still hope that a discount-heavy peak trading can still provide some respite for retailers’ balance sheets. However, it is clear that things are not likely to get any easier in the new year, and those struggling to stay afloat might fall by the wayside. To keep their business’s head above water, it might be the time for retailers to review their business models, as well as streamline or cut down on costly processes such as returns.