Tills go quiet as a bleak winter threatens for retailers

Something odd happened in York this weekend. The streets were as busy as ever with tourists, the pubs seemed to be doing good business and one particularly hardy stag do braved the elements in 70s fancy dress.

However, inside the shops it was a different story. Saturday was supposed to be the busiest on the high street in the run-up to Christmas as the country made a mad final present dash. The forecasts predicted car parks would be overflowing and, after a year of financial uncertainty, it would be a rare chance for retailers to breathe a sigh of relief. Sadly, no-one it seems had told shoppers in York. Or, for that matter, anywhere else.

The cashier at Marks & Spencer said it had been quieter than even a normal weekend, there were few queues at any of the tills and elsewhere shop assistants looked at a loose end. It wasn't just anecdotal evidence, the poor show has now been confirmed by new figures released by the market research group Synovate.

Surveying 6,000 shops, trading on Saturday, it said, was down an average of 10 per cent on the same day last year, a decline it said resulted from many deciding it wasn't worth braving the sub-zero temperatures.

Since temperatures first plummeted last month, many stores have already seen the Big Freeze impact on till receipts and, according to the long-term forecast, the news isn't good for retailers as the bleak midwinter looks set to continue into the new year and beyond.

In January, shoppers are still expected to queue all night for the best bargains, collectively spending 22.5bn in the sales. It's a figure hard to comprehend, but equates to the average shopper spending 370 each in the first few weeks after Christmas.

However, once the final cut-price items have disappeared and the much-talked-about VAT rise begins to bite, many retailers, from small independents to the big chains are braced for what could well be the toughest 12 months on the high street in living memory.

"The sales offer a great opportunity for consumers to get a real bargain as retailers try to sell off their excess Christmas stock," says Chris Simpson, marketing directory of Kelkoo, whose research shows that half of us have vowed to rein in our spending in 2011. "However, the success, or otherwise, of the January sales depends not only on what customers want and what they are prepared to pay, but also on retailers' success during the Christmas period.

"This year, stores are expected to have planned carefully for the festive season to avoid being left with too much surplus stock, so bargains may disappear more quickly than usual.

"Consumers still view the sales as a clear opportunity to save money. However, this year, instead of heading to the high street, it looks like more and more of us will be searching online for the best deals. Internet sales are expected to exceed 3.8bn, an increase of 12 per cent in comparison with last year and the highest spend of any European country."

In an effort to minimise the impact of decreased consumer spending, less than one in five retailers will pass on the full VAT rise in first month following its introduction, with many planning to introduce a partial or staggered increase to bolster January spending.

However, all that may not be enough. The British high street has already lost many famous names and more may go the way of Woolworths, Zavvi and Adams which have all closed their doors within the last two years.

"Although the economic circumstances have resulted in a trend towards greater frugality, increased savings and reduced use of credit, we anticipate a positive kick-start to 2011 for UK retailers which will at least by a welcome initial boost.

"However, this January, the sales period could be the calm before the storm. Retailers should see an average boost in spending of 1.6 per cent on last year's figures, but this could well be the last hurrah for retailers before the Government's austerity measures dampen consumer spending in earnest for the coming year.

"Some retailers have had their Christmas balance sheets shored up by 'Beat the VAT Increase' offers and shops are likely to continue to employ tactics to prop up consumer spending levels until the end of January.

"However, as the troubled economy and the VAT hike take their toll, it could well spur a back -to-basics approach to spending, with one in two consumers already claiming they will cut back on purchases throughout 2011."