By Aimee Chanthadavong
Retailers are expected to rely on discounting to lift sales this Christmas as selling prices now reach the lowest level in more than two decades, according to the latest Dun & Bradstreet survey.
The National Business Expectations Survey reveals Australian retailers show 49 per cent of business expect sales to increase over Christmas. The expected sales index is now at 33 up from 11 last year.
Meanwhile, selling price expectations have fallen by more than 10 points over the past two years and are now at an index of 11. The selling price index fell nine points to three during the June quarter – the lowest index level since 1997. Concurrently, sales rose to an index of 22, up from an index of five the previous year.
Dun & Bradstreet’s CEO Gareth Jones told RetailBiz businesses are being forced to discount much more regularly than they would have prior to the GFC.
“It was pretty clear what they’re planning to do during the Christmas period. From our most recent survey we had 1,200 respondents and there was a very clear message they are planning to discount significantly but believe their sales will increase as a result of that,” he said.
The anticipated reliance on discounting to deliver sales during the December quarter reflects the approach taken by many firms during the June quarter 2012.
The implementation of discount campaigns is expected to impact margins in the coming months. While profit expectations are elevated compared with the same period last year, one in five firms expect profits to fall during the December quarter. Retails have expressed the most conservative expectations for profits in the coming quarter, with a profit outlook 14 points below the all firms average at an index of seven.
“Certainly discounting will put pressure on margins. Our survey indicated businesses are confident this will be a good Christmas so as a whole while prices are discounted and margins are low people will be spending, which is great news for retailers and the economy at large,” Jones said.
Jones also noted discounting is no longer a seasonal tactic but has now becoming a norm, which consumers have become accustomed to and are now no longer willing to buy items at full price.
“I think we’ve seen for sometime consumers have been cautious about spending. People are waking up to the idea of online shopping and are now able to check prices online. What this is doing is driving retailers to be more creative in pricing, inventory management and product range that would make them more efficient. This would lead better to deals to consumers and better outcome for the economy. It’s a win-win situation,” he said.
The Reserve Bank’s decision to cut rates will also further encourage spending this Christmas, Jones said.
“All the reports are already indicating there’ll be another rate cut before Christmas. Our survey indicates with prices coming down on inflation this will clearly relieve pressure on the dollar and encourage consumers to put their hands into their pockets.”