Australians retailers divided on timing of pre-Christmas price cut

Australian retailers seem to be divided over whether a pre-Christmas price cut really makes sense in driving up sales. Some say it is not needed as the season’s rising sentiment itself will take care of that. However, the non-conformists cannot hold on for long and may wilt under pressure as many big retailers are readying to unleash a wave of discounts to drive up their sales.

Action will be most pronounced in the hot selling fashion segment that is most exposed to the Christmas sentiments. It appears that the next five and a half week will see the retail sector keeping its focus on biggies like Myer and David Jones, whom they expect to set the trend in price cutting even as many store owners are praying for a late start for the price cutting.

However, Myer refused to discuss the Christmas sales strategy except saying that it will stay flexible like any other retailer and will move at a moment's notice. David Jones too preferred to be secretive about its plans, reports The Sydney Morning Herald.

Follow the leader

However, expectation looms large that Myer and David Jones will not go on a discount sale too early.

“Most retailers have to react when the majors go on sale,” Retail Apparel Group chief Gary Novis said.

In the view of retail analyst, Peter Ryan, seasonal price slashing is counterproductive and punctures the margins of retailers as that is the only season when shoppers are ready to spend lavishly.

Noting that despite all gloomy headlines Australian household income is still growing, the analyst argued that a price cut is unnecessary as Christmas is the time when shoppers really enjoy spending more.

Cuts inevitable

The reality is that price cut is inevitable and all retailers including top department stores such as David Jones and Myer are willing to slash prices in the period between the the first wave of Christmas shopping and the last-minute wild rush.

"Like lemmings, retailers panic when they're in the hole ... and all they do is give up margin for sales,” Ryan observed.

No data exists to prove that shoppers are driven by discounts. Deloitte's David White is positive that shoppers could draw the Christmas discounts at many retail outlets quite early, this year. Deloitte's research has suggested that close to one third of all retailers are planning to begin discounting in early December, which is the highest proportion since the survey began four years ago.

"With one in five yet to decide if and when they'll start discounting, it could be a case of who will blink first," White said.

Deloitte said this points to the uncertainty around the strength of consumer sentiment as well as the increasing sophistication of retailers. Despite an early start to price cutting, Deloitte said 80 percent of retailers are hoping that 2015 Christmas sales will surpass the earnings from the 2014 season.

Deloitte's survey also found that despite online retail's big profile, transactions are still less than 2 percent for the total Christmas sales. Deloitte is advising Australian retailers that understanding what customers want must be their significant focus in the crucial Christmas period.

Trade body’s expectations

Meanwhile, the Australian Retail Association (ARA) executive director Russell Zimmerman said appliance retailers are pleased that household goods along with clothing, footwear and personal accessories are enjoying strong growth. The segments are rising at 6.2 percent and 6.1 percent, respectively.

He said the growth in household goods is driven by the strength of the housing market in September and renovation shows in TV, such as The Block. The high demand in clothing, footwear, and personal accessories is led by the onset of warmer spring weather. Among the states, Victoria was ahead with the highest growth in sales at 4.8 percent year on year.

He said ARA expects Christmas sales in 2015 not falling below the $45.2 billion of 2014. The early prediction is that Christmas revenue growth will be at least 4 percent above the sale in 2014, reported Appliance Retailer.

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