By James Davey
LONDON, Jan 10 (Reuters) - Rampant discounting dominatedChristmas retail trade last year - but the clear winners werethose who held out against price cutting and had bothhigh-street and online stores to benefit from the last-minutesurge in trade.
"December 2013 was all about nerve, margin andmulti-channel," said David McCorquodale, head of retailconsultancy at KPMG. "Those who ... provided a seamless servicebetween channels will feel pleased, whilst those who discountedheavily to force sales will count the cost in margin."
Despite signs the British economy is improving, householdincomes remain under pressure because inflation is outstrippingpay rises, and retailers who have published trading updates sofar are showing mixed Christmas results.
The British Retail Consortium said shoppers spent 1.8percent more in December than a year earlier, helped by a surgein the four days before Christmas. But overall that number was adrop from annual growth of 2.3 percent in November.
Using a like-for-like measure which adjusts for changes infloor space, sales were 0.4 percent higher on the year comparedto a 0.6 percent increase in November.
"While confidence levels were higher than the previous year,this wasn't always matched by more money in pockets," said BRCdirector-general Helen Dickinson.
With two thirds of UK GDP generated by consumer spending,the figures will raise questions about the durability of theeconomic recovery in 2014 - not least because retailers arealready warning consumers are likely to tighten their belts inthe early part of 2014 after splashing out at Christmas.
"We expect customers to spend cautiously in the few monthsfollowing Christmas, in an attempt to rebalance the householdfinances," said Justin King, CEO of J Sainsbury.
Simon Wolfson, CEO of Next, Britain's No. 2 clothingretailer, pointed out that economic growth was likely to resultin higher interest rates which, in turn, would probably moderatemortgage-owners' spending.
WINNERS AND LOSERS
So far the winners from the festive period are Next, topdepartment store group John Lewis and its sistercompany and sixth-largest grocer Waitrose. Heavy discountersAldi and Lidl also enjoyed a goodChristmas, taking share from the "big four" grocers - Tesco, Wal-Mart's Asda, Sainsbury's and Morrisons.
High profile casualties were Debenhams, the No. 2department store, and Mothercare, the baby productsgroup, which both issued profit warnings, as well as Tesco,Morrisons, and Marks & Spencer - the country's largestclothing retailer - which all had profit forecasts for the fullyear cut as a result of poor Christmas sales.
The losers all blamed an unprecedented level of promotionalactivity, fewer customers on the high street and a continuingsqueeze on household incomes. Unseasonal weather also hitclothing sales in particular.
The winners' strategies were to hold firm and offerextensive online shopping facilities: Next has a strict policyof never discounting until its Boxing Day sale and is now oncourse to make more profit in 2013-14 than M&S. It also profitedfrom shoppers' growing confidence in ordering online
The BRC said online sales of non-food products grew 19.2percent in December year-on-year, the highest growth in fouryears, with one in five non-food products bought online, helpedby the surge in use of smartphones and tablets.
Next week will bring another raft of updates from retailersincluding Burberry, Primark, ASOS,Ocado, Dixons and Home Retail.
Meanwhile, the losers will be licking their wounds andpondering a promotional strategy re-think.
Analysts at UK brokerage N+1 Singer suggest evidence ofdiscount fatigue among customers of Debenhams, among others, maynecessitate it going "cold turkey" for a period.
