Subscribe Feed (RSS)Why stores are slashing prices
December 23rd, 2008 by admin | Filed under Central banks, Daily News, Retail, UK Banks.Cash from last-minute Christmas shoppers is a lifeline many high street bosses are trying to grab to stay in business.
The reason for all the high street sales is the stores are running out of cash and they have two problems at the end of the month – paying extra staff taken on for the season and paying their rent.
Most commercial rents are paid quarterly and the next quarter day for rent payment is Christmas Day.
The payroll is also bulging with extra staff taken on to cope with the traditional Christmas rush.
Virtually every store is running a sale in a bid to entice shoppers – and the discounts are especially deep in many fashion retailers.
Even Tesco has a 70% off clothing and other chains, like Principles and Whistles have cut 50% off everything in store.
In the queue is B&Q, the DIY chain, which is starting its January sale on Christmas Eve, along with most of the leading retail websites, including John Lewis and House of Fraser.
Tesco has slashed the prices of 100% silk women’s shirt from £25 to £7.50 and men’s jeans from £15 to £4.50.
Whistles’ entire range of silk cocktail dresses is a snip at £68, down from £171.
The sales are aimed at encouraging shoppers to spend their cash earlier so the stores can meet their bills – starting the sale on Christmas Eve instead of Boxing Day means the first day sale cash bonanza arrives before not after the rent day.
Ernst & Young, the consultancy firm that monitors high street prices, predicts that by Christmas Eve the average price in shops will be discounted by 40%.
“The problem is how are the stores going to put up prices when shoppers feel that if they can still take 40% of the price and make money?” said one analyst. “A lot of shoppers feel with some good reason that the stores have made too much profit out of them and are now paying the price.”
The big supermarkets are expected to weather the storm – but everyone else is at risk.
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Tags: B&Q, British Economy, British Pound, Credit Crunch, Ernst & Young, Finance, Financial News, House of Fraser, John Lewis, Principles, Tesco, Whistles
