As more bargain hunters look for steeper discounts after the Christmas shopping frenzy, doubts are raised about the profitability of retailers during the holidays, the Financial Times reported. In London, there was more traffic both in online and brick-and-mortar stores during Boxing Day, a public holiday considered as one of the busiest shopping days of the year. Retail data analyst Springboard said footfall in UK stores was higher by 1.5% compared to last year.
However, profits might not be as high as retailers offer high discounts. New West End Company Chief Executive Richard Dickinson told the Financial Times, "Retailers use Boxing Day to shift volume stock. Profit margins are quite tight with discounts of up to 75 per cent."
Meanwhile, the season was expected to be the worst in the US since the beginning of the economic recession in 2008. Retailers were prompted to lure customers with unusually huge price discounts because of the uncertainty over consumer confidence and the results of late Thanksgiving which reduced nearly a week from the usual pre-Christmas shopping season.
Data from MasterCard Advisors SpendingPulse revealed that the strategy was successful in luring customers to spend. From November 1 to December 24, sales increased 2.3% which was a 0.7% rise compared to the same period in 2012. Like in the UK, however, retailers' profits still remain in doubt. MasterCard Advisors Senior Vice-President Sarah Quinlan said that while sales had been robust, massive discounting is expected in men's and women's apparel just to clean up their inventory. She added that the best sales are in jewelry.
UK retail consultant Richard Hyman was quoted in the report as saying, "This has been a very disappointing Christmas for retailing in general and clothing in particular. Retailers have been seduced by the relentless upbeat talk of economic recovery - that no one has told the consumer about."
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