Retailer Promotions: Spring-Summer 2020

Will there be lockdown bargains for shoppers as retailers reopen?

Online promotions approached Black Friday levels in May, but bargains dry up as physical stores prepare to reopen

The COVID-19 lockdown has forced non-essential high street stores to remain closed for almost three months, leaving retailers with the unenviable task of clearing almost a season's worth of unsold stock. Amongst fashion retailers alone, it has been estimated that as much as £15bn of stock is lying unsold in stores and warehouses up and down the country.

With fashion trends moving faster than ever, and just two months before the traditional launch of the Autumn-Winter season, could there be bargains for shoppers as non-essential physical stores open in England from 15 June? We’ve updated the promotions survey that we usually undertake in the run up to Black Friday and Christmas to see if it gives us any clues. Read on for our findings:

  • Almost all retailers used online promotions to clear stock during May, and discounts have been deep - often 50% or more - but usually only on selected products and categories

  • Over the second May Bank Holiday weekend, the number of retailers on promotion approached the already record levels seen on Black Friday in recent years

  • However, multichannel retailers are already scaling back promotions, so we do not expect the same level of post-lockdown sales when physical stores reopen

  • There are practical and financial reasons why we don’t expect widespread in-store promotions when stores reopen in mid-June...

  • ...but that doesn’t mean there won’t still be bargains for shoppers later in the summer if trading in June and July does not meet expectations

Using online promotions to clear stock

A staggering 81% of online retailers in our sample had some kind of special promotion or sale advertised on its homepage over the second May Bank Holiday this year (Monday 25 May). Amongst fashion retailers, that figure rose to 85%.

That compares to 88% on Black Friday last November, which has rapidly replaced the Boxing Day sales as the biggest promotional discount event in the UK retail calendar.

So it’s clear that retailers have had to resort to promotions to entice shoppers online during the lockdown period. The fact that promotions were more widespread amongst fashion retailers suggests, perhaps not surprisingly, that the need to clear seasonal stock is much more acute in clothing than in general merchandise categories, ranging from home and electricals to beauty and sporting goods.

Promoting deeper, but smarter

Looking more closely at the most heavily promoted category of fashion, our survey shows that discounting has typically been much deeper than over Black Friday, reinforcing the urgency of retailers’ stock clearance initiatives.

For example, over the May Bank Holiday, more than 40% of online fashion retailers were advertising half price sales on their homepages (between 41% and 60%), with a further 6% promoting discounts of more than 61%. By comparison, the majority of advertised promotions over Black Friday were reductions of either 20%, 25% or 30% off.

However, unlike Black Friday, promotions during May were typically concentrated on a selected range of products, and therefore better targeting stock that needed to be cleared the most. ‘Blanket promotions’, such as 20% off the whole store, remain common over Black Friday, with 48% of fashion retailers resorting to these tactics, albeit usually only for a few days. By contrast, just 15% of fashion retailers, and 5% of general merchandise retailers, adopted the same promotional mechanic in May.

Pulling back on promotions ahead of reopening

So does the surfeit of stock and retailers’ willingness to discount deeply signal that there will be bargains for shoppers when non-essential physical stores open in England from 15 June?

We don’t think so. There’s already evidence from our promotions tracker that some retailers turned off their promotional activity following the UK government’s official announcement of its June reopening timetable, made during the Prime Minister’s daily press briefing on 25 May.

The reduction in promotions was notably more marked amongst multichannel retailers (i.e. those with physical stores) than in pureplay (online-only) retailers, almost as if to decondition shoppers from expecting bargains. And some bricks-only retailers have publicly announced that they do not intend to offer ‘special discounts’ when they reopen.

Conversely, pureplay retailers, soon facing increased competition from physical stores, may need to increase their promotional and discounting activity in order to clear what stock they have left.

Why no big sale bonanza on the high street?

At least in the short term, social distancing constraints will limit the number of customers in stores at any one time. While more flexible working patterns mean that customer visits may be more evenly spread across the week, clearance sales could encourage crowds of shoppers that stores are unable to accommodate. The experience of some fashion retailers that have already reopened in Europe is that higher basket size offsets this lower overall footfall to some extent.

The reopening of non-essential stores in Europe, as well as essential or ‘lower risk’ stores in the UK (e.g. garden centres, home furnishings and DIY stores), have seen huge consumer demand, and well-publicised queues of shoppers in car parks waiting to enter stores. Our consumer sentiment survey shows many consumers have increased disposable income, so there may be no need to discount if they are willing to pay full price.

As well as preserving full price sales, retailers are finding other ways of protecting their margins. These include mothballing less fashion-dependent ‘continuity stock’ (e.g. storing basic T-shirts until next year) and managing stock levels further up the supply chain (e.g. by cancelling orders, or delaying the official launch of the Autumn/Winter collection), albeit limited by lack of warehouse space and the cash requirements of these strategies.

One of the other challenges for fashion retail is the typical 30%-40% rate of returns, which often gets exacerbated by sales promotions that encourage customers to buy more in the knowledge that they can return what they don’t want later. While there is some evidence that returns levels have fallen during the lockdown period, the impracticality of accepting and reselling returned goods with the need for heightened hygiene measures means that retailers will not want to encourage this.

Gone are the days when stores, whether physical or online, were the only way to clear stock. Although some traditional clearance avenues are also capacity constrained (e.g. off-price and charity retailers), stock can still be sent abroad (e.g. to counter-seasonal markets such as Asia and Australia), or even upcycled (e.g. to make masks or PPE).

The evidence from our Promotions Survey suggests that retailers are planning to take advantage of pent-up consumer demand to minimise their discounting at least initially when physical stores reopen in England. But this is a high risk strategy: if trading does not meet expectations in June and July, retailers will be left with too much stock and the chance to turn this into cash will be too tempting to resist. So there may yet be bargains for shoppers who wait until later in the summer, provided they can hold their nerve until then.

Lisa HookerLeader of Industry for Consumer Markets, PwC UK

PwC Promotions Survey Methodology

  • Survey sampled by PwC’s Northern Ireland team every Monday from 18 May 2020, using the same methodology as the Christmas promotions survey

  • The sample consisted of 167 online retailers, including 110 fashion/predominantly fashion retailers and 57 general merchandise or other speciality retailers

  • ‘Promotions’ defined as a discount off some or all products in the store, and advertised on the internet landing page

  • Excludes ‘everyday’ promotions such as student/club discounts, newsletter sign-up discount, free delivery, year-round clearance rail not advertised on storefront, etc

  • Also excludes email, newsletter, voucher code and member-only promotions

  • We have been tracking online promotions by this methodology in the run up to Black Friday and Christmas since 2016

Contact us

Lisa Hooker

Lisa Hooker

Leader of Industry for Consumer Markets, PwC United Kingdom

Tel: +44 (0)7802 882562

Kien Tan

Kien Tan

Director, Retail Strategy, PwC United Kingdom

Tel: +44 (0)20 721 23910

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