Winners the ones that kept their nerve

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RAMPANT discounting dominated Christmas retail trade last year – but the clear winners were those who held out against price cutting and had both high-street and online stores to benefit from the last-minute surge in trade.

“December 2013 was all about nerve, margin and multi-channel,” said David McCorquodale, head of retail consultancy at KPMG.

“Those who provided a seamless service between channels will feel pleased, while those who discounted heavily to force sales will count the cost in margin.”

Despite signs the economy is improving, household incomes remain under pressure because inflation is outstripping pay rises, and retailers who have published trading updates so far are showing mixed Christmas results.

The British Retail Consortium said shoppers spent 1.8 per cent more in December than a year earlier, helped by a surge in the four days before Christmas. But overall that number was a drop from annual growth of 2.3 per cent in November.

Using a like-for-like measure which adjusts for changes in floor space, sales were 0.4 per cent higher on the year compared to a 0.6 per cent increase in November.

“While confidence levels were higher than the previous year, this wasn’t always matched by more money in pockets,” said BRC director-general Helen Dickin- son.

With two thirds of UK GDP generated by consumer spending, the figures will raise questions about the durability of the economic recovery in 2014 – not least because retailers are already warning consumers are likely to tighten their belts in the early part of 2014 after splashing out at Christmas.

“We expect customers to spend cautiously in the few months following Christmas, in an attempt to rebalance the household finances,” said Justin King, chief executive of J Sainsbury.

Lord Wolfson, CEO of Next, Britain’s second biggest clothing retailer, pointed out that economic growth was likely to result in higher interest rates which, in turn, would probably moderate mortgage-owners’ spending.