BRC: December discounts spur shop price slide

In Industry Comment, Industry News On

The British Retail Consortium (BRC) and Nielsen have released figures for December shop prices, with non-food prices falling at the fastest rate since January 2017.

Shop prices slid deeper into deflationary territory in December, falling 0.6% on last year compared to the 0.1% decline in November, the shop price index revealed. This is the deepest deflation since March 2017.

Non-food prices fell at their fastest rate since January 2017, declining 2.1% year on year compared to 1.1% in November. However, food inflation gathered steam, with inflation increasing to 1.8% in December, up from 1.5% in November.

BRC chief executive Helen Dickinson OBE commented:  “After several months of shop prices teetering on the edge of inflation, December saw them retreat deeper into deflationary territory. Prices in December fell at the fastest rate since March this year when only last month we saw the shallowest rate of deflation for four years.

“This is good news for shoppers. Retailers offered lower prices at the beginning of December than last year on many of their non-food ranges, providing welcome options for Christmas shoppers on a stretched budget. These discounts allowed consumers some much needed breathing room during the festive period at a time when the cost of their food shop is on the rise.

“Food inflation picked-up pace this month, fuelled by climbing global food prices earlier in the year. While retailers will continue to do their best to absorb cost increases for their customers, the challenges to the industry remain stark with more inflationary pressures in the pipeline.

“Therefore, this year we will continue to press the Government for clarity on the principles and terms around the Brexit transitional arrangements, to ensure businesses have the certainty to plan and invest and that consumers don’t face higher costs or delays from tariffs or onerous customs barriers.”

Nielsen head of retailer and business insight Mike Watkins added: “The SPI inflation rate is below other inflationary measures, showing there is little inflationary pressure coming from retailers. With consumer confidence wavering and unpredictable levels of demand, many non-food retailers have been keeping prices low to stimulate spending, which will undoubtedly have come at a cost to margins.  Whilst food prices have edged up a little due to supply chain increases in fresh and seasonal foods, pricing across Supermarkets will remain competitive as we start 2018 with consumers still coping with higher household bills.”

Salmon global head of retail Patrick Munden was among those to comment on the statistics. “The new figures paint a mixed picture for retailers and shoppers; better news for the latter, who are cashing in on lower prices offered by retailers concerned that their Black Friday deals would impact their Christmas sales,” he noted. “But this could very much become the norm from now; Black Friday has now rapidly overtaken the Christmas and New Year sales as the retail bargain event, with many retailers facing the prospect of a quieter December. This shift in peak trading should signal a shift in strategy for many stores, where creating their own ‘peak’ days to differentiate themselves from their competitors might the solution to bolstering Christmas profits. And all this should of course be done through a multichannel approach, both in a retailer’s physical store and their ecommerce website.

“There are further signs of retailers struggling during this period too; figures released this year from Springboard show footfall numbers had dropped over 10% on New Year’s Eve in shops year-on-year, so retailers need to ensure that they are implementing strategies that keep consumers coming back to spend their money. As well as reduction in price on many items, employing new forms of in-store technology is another way to keep customers enticed and help retailers increase footfall and sales during difficult periods.”

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