Deep discounts haven't pulled in UK shoppers

In summary, a new report from Experian, a leading UK research company, has found that the numbers of shoppers in-store have continued to fall.
• Discounts fail to boost shopper numbers as Experian Retail FootFall Index drops 0.9% (November 2008 v November 2007) with Scotland falling furthest (-5%)
• Retail business failures rise 21% in November including Woolworths and MFI.
• UK Internet searches for discount vouchers increase by 133% over the last 12 months. Visits to voucher websites are up by 45% over the last 12 months.
• Christmas retail marketing battle will be won and lost online and offline this year.

Despite the extraordinary level of pre-Christmas discounting and unprecedented one-day “spectaculars”, shopper visits remained down in November with the latest monthly Experian Retail FootFall Index recording a decline of 0.9% compared to November 2007. Looking at the regional picture, Scotland saw the steepest decline in shopper numbers (down 5% on last November) but the South East experienced a slight rise in shoppers (up 1.3%) probably as a result of the massive discounts on offer.

Retail viewpoint

“From a UK wide perspective, it seems efforts at deep discounting have failed to attract significant shopper numbers into the stores,” commented Jonathan De Mello, director of retail consultancy at Experian. “The spectacular events held at the end of the month provided some spikes in shopper numbers but levels have quickly dropped back and, overall, shopper numbers are down on last November. Deep discounting by retailers may have also brought forward shoppers from December into November and set back the traditional Christmas rush by at least a week.

“It is possible that purchasers of major items will have held back until the government's lowering of VAT by 2.5% takes effect in December. However, these are unprecedented times and it remains to see whether this new government initiative translates into a boost in shopper numbers or higher consumer spending in the run-up to Christmas.”

The tally of retail business failures continues to rise according to the latest Insolvency Report and Distress Index by Experian. There has been an 18% increase in the number of retail casualties in the last 12 months, now totalling some 1,017 non-food retailers, a toll that includes Woolworths and MFI. The rate of retail business failure is also accelerating each month, rising by 21% in November for non-food retailers and by 50% for food retailers.

Online retail viewpoint

Consumers have been busying themselves online looking for bargains according to the latest information from Hitwise, an Experian company. UK Internet searches for discount vouchers have increased by 133% over the last 12 months, while visits to voucher websites have gone up by 45%. Bargain hungry shoppers are looking for discount vouchers that will help them save money both online and on the high street. During the 12 weeks ending 15 November, UK Internet users searched for over 20,000 different variations on the term ‘voucher', with many of these looking for discount voucher codes to use at the online checkout.

Robin Goad, Director of Research at Hitwise, explained: “A whole online sector has emerged to feed British consumers' hunger for discount vouchers for everything from supermarket shopping and pizzas to discounts at high-end department stores. One in every 200 visits to an online retail website now comes from voucher sites such as Hot UK Deals or My Voucher Codes, while ‘consumer revenge' website MoneySavingExpert has become the first port of call for many consumers before heading out to the high street or shopping centre. Despite the economic downturn, we've even seen an increase in visits to restaurant websites, and much of that traffic is people looking for discount vouchers.”

Economic viewpoint

Matthew Sherwood, Senior Economist at Experian added: “Retailers are quickly discovering what shoppers are already realising - that this downturn has much further to run. UK consumers will be watching their pennies closely in the year ahead and thus there is little relief in site. The cut in the rate of VAT does provide some help, but not for the expected reasons. With consumers staying out of the shops, many retailers are likely to hold on to the tax cut. If costs continue to fall, then this may be enough to avoid too many more Woolworths and MFIs.”

Marketing viewpoint

Marie Myles, Director of Marketing Consulting at the company's Integrated Marketing division, said: “The Christmas retail marketing battle will be won and lost in the ‘multi-channel' arena this year. The tough trading conditions will see retailers focussed more than ever on their existing customers, instead of simply trying to attract new ones. This means that loyalty marketing campaigns will go into overdrive, where retailers look to entice regular customers into visiting their online and high-street stores with incentives over and above the current discount voucher phenomenon.

“The big winners this year will be the retailers that run personalised online and offline customer marketing campaigns with offers that appeal directly to what each of their customers want. Retail marketing this Christmas is going to get personal.”

Chart indicating Experian National FootFall index November 2008. Looking at the footfall analysis by region, the areas affected include Scotland, North West, South West & Wales, the Midlands, Eastern and the London region. Conversely, shopping figures in the North East, Yorkshire & Humber and South East remained positive (see regional table).

Top 10

The top 10 branded UK Internet searches containing the word ‘voucher', 12 weeks ending November 15, 2008

1. Tesco voucher codes
2. Pizza express voucher
3. Tesco voucher
4. Asda voucher codes
5. Tesco voucher code
6. Paypal voucher
7. Play.com voucher
8. Amazon voucher
9. Amazon voucher codes
10. ebay voucher