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Massive discounts are on the cards this festive season as retailers brace themselves for the bleakest Christmas sales season in nearly two decades, experts say.
"Retailers will have to go all out this Christmas to entice consumers. I would not rule out big discounts from durables, semi-durables and non-durables retailers," Luke Doig, senior economist at Credit Guarantee Insurance Corporation, said on Friday.
Today, known as Black Friday in the US, marks the beginning of the traditional Christmas shopping season - putting retailers "in the black" - but sales forecasts for the season are gloomy, with Doig saying his initial forecast of a two percent real decline "looks optimistic" at this stage.
Supporting this forecast is this week's survey by the Bureau for Economic Research (BER) and Ernst & Young, which showed that 13percent of the retailers expect lower sales volumes in the fourth quarter, the weakest result since the 1992 festive season.
Retail sales, as released by the Statistics SA, have dropped every month since May, highlighting the distress faced by consumers given the lagged effects of interest rate hikes and high debt levels.
Meanwhile, earnings reports from several listed retailers show a common theme slowing top line growth. This raises concerns about retailers' ability to implement price markdowns without affecting the quality of earnings.
"What are they going to do? Better volumes at the expense of margin? I think there is still room to give up some margin, otherwise they'd be sitting with high stock levels in January," said Doig.
According to the survey, while more than three-quarters of the respondents raised prices in the third quarter, this came down to 61percent in the fourth quarter and less than 50percent expect to increase prices early next year.
A snap website glance-through of major retailers shows that they are on furious promotional campaigns, with retail chains from Woolworths and Edgars to Game running massive shopping competitions. - I-Net Bridge