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Retailers discounting fashion lines

Slashing prices ‘won’t stop’ shop squeeze, says Russell

Austin Reed, Perth. One of the outlets that closed (photo by Terry Murden)

High street fashion retailers could be making a mistake by slashing prices to cope with the effects of higher wages and other costs, it has been claimed.

More than a third (36%) of retailers are discounting clothing ranges against a fifth  (21%) for the same period last year, according to a survey by multi-retailer fashion app Mallzee.

However, Mallzee  CEO Cally Russell has questioned the wisdom of cutting prices and says retailers should think more about improving their stock ordering.

It researched 100,000 products from more than 150 high street retailers and found the industry is already starting to feel the effects of the predicted ‘Perfect Storm’ of fiscal pressures.

Retailers are dealing with increasing costs of products, staff and business rates whilst at the same time facing a reduction in consumer confidence.  The British Retail Consortium reported a 0.9% reduction in February compared to a year earlier.

Mr Russell, founder and CEO Mallzee, said; “Because we have 150+ retailers full ranges featured in the app we are able to quickly spot trends in retailer habits and this increase in discounting appears to correlate to all the recent warnings on the state of our high streets balance sheet.  I just worry that discounting is a short term sticking plaster solution.

Cally Russell 4

Cally Russell: better ordering

“Discounting isn’t the only way to handle the current pressures, in fact last year it was estimated by the Business of Fashion that up to $1 trillion is lost in the fashion industry every year via poor discounting and stock ordering.”

Mallzee has developed a data measuring tool to provide real time information on customer buying trends and marketing.

A recent McKinsey report showed that changing pricing strategy by 1% can increase profitability by 8.75%.

The results coincide with a hike in the minimum wage from today which will have a particular impact on the retail trade.

The data also follows a number of big name collapses, such as Bhs, Austin Reed and Jones the Bootmaker.

Today marks an increase in the threshold at which firms in Scotland start paying the Large Business Rates Supplement (2.6p in the £ in Scotland compared to 1.3p in the £ in England). It will rise from a rateable value of £35,000 to £51,000.

David Lonsdale, director of the Scottish Retail Consortium, said:Scottish Ministers have at least begun to acknowledge our concerns about last year’s doubling of the Large Business Rates Supplement by upping the threshold at which it applies, which is a welcome step forward.

“However it remains the case that 5,077 retail premises in Scotland – including many medium sized firms – will continue to pay the supplement at a rate twice that which applies in comparable premises down south.

“That equates to Scottish retailers paying over £12 million more in rates than they would if operating in England, with many other sectors similarly affected given 21,000 Scottish premises in total pay the supplement.

“Last year’s doubling of the Supplement took absolutely no account of trading conditions, and we’ve yet to hear a convincing explanation as to why medium sized and larger firms here are better placed to be stumping up more in business rates than competitors or counterparts down south.

“We hope Scottish Ministers will recognise this discrepancy, and take further action to level the playing field.”

Today the minimum wage for over 25s will increase by 4.2%, while the rates for younger workers will increase by 0.9% to 1.4%.

 

Current rates

New rates from 1 April 2017

% increase

25 and above

£7.20

£7.50

4.2%

21-24

£6.95

£7.05

1.4%

18-20

£5.55

£5.60

0.9%

16-17

£4.00

£4.05

1.3%

Apprentice rate

£3.40

£3.50

2.9%

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