Last weekend it finally began to feel a bit wintry, which made me realise my baby didn’t have a proper coat. So I packed her into her pram and off we went to Baby Gap where we chose a bright pink coat with a little fake fur collar (sounds hideous I know, but she seems to like it).
The price tag said £39. This seemed a bit steep, so I was pleased to find that I was only expected to pay £26. Why? Because I had with me a voucher my mother had forwarded giving me 30% off anything bought between November 29 and December 3. The voucher had no restrictions on it — anyone could print it and use it as much as they liked.
I asked the woman at the till how many people had used it that day. Her answer should send a bit of a chill down the spine of the person responsible for maintaining Gap’s profit margins: by her estimation around 70% of customers were using it.
Since then, I’ve received many similar vouchers — 25% off at Coast, 20% off at Borders, 20% off at Selfridges, 20% off at Kurt Geiger and 40% off at Threshers. The latter is only 7% more than you get off if you use its three-for-the-price-of-two offer, but if you are stocking up for Christmas 7% is better than nothing. Heal’s has taken 50% off much of its furniture, and if you have one of its special cards (sent to customers) you can get another 10% on top of that.
Discount vouchers: what’s going on?
Most of the voucher offers have time limits. The Threshers one runs out today, so if you haven’t yet, there’s just about time to get a voucher and get to the shops — type “Threshers voucher” into Google and you’ll find one in no time. Nevertheless, the fact that the retailers have put them into such wide circulation does slightly smack of desperation.
Things don’t look good in the retail sector. November sales numbers were disappointing, the Retail Footfall index suggests that the shops have more than 7% fewer customers than last year, and last week Woolworths admitted that its overall sales were down 6.5%. There are suggestions that the mild autumn hit clothes sales at many of the big fashion chains to the tune of 10% to 15%.
The reason for the vouchers is pretty clear: retailers hope that by tempting people through the door with large discounts, they can kick-start the Christmas consumer frenzy and get revenues up enough to compensate for the reduction in their margins.
There’s no reason for the big retailers to think this won’t work, after all one of the main drivers of the boom in retail over the last few years has been the incentive factor of low prices. The cheaper things are, the more we have tended to buy, regardless of the fact that the end result is to increase our overall spending.
Will vouchers help the retail sector?
However, I suspect that times have changed. I can’t see the flood of vouchers doing the rounds of the internet helping the sector out this Christmas. My Gap voucher didn’t make me buy anything I wasn’t already planning to buy: I bought the coat I was going to get anyway, just for less. And my Heal’s discount card won’t be helping overall sales there either. I gave it to a friend who was planning to buy a particular sofa there this weekend. She’s still going to get just one sofa, but she’s going to pay 10% less for it.
The fact is that Britain isn’t in as much of a shopping mood as last year. Some of us are simply unable to spend any more (the banks have been reporting continuous rises in debt defaults). Others are beginning to feel that the recent interest-rate rises, high utility bills, high petrol prices and rising food prices are making saving more attractive than spending (prices at Tesco actually rose 0.8% in the three months to November 25). This is a feeling not helped by the constant threat of rising taxes.
What retail sector woes mean for investors
Not all retailers will do badly of course — all that City bonus money has to go somewhere — but in general the arrival of the internet voucher must, I think, be seen as a bad sign for the sector. I can’t imagine that giving up that much margin, even if only for a few days, is a decision the likes of Gap take lightly.
For investors I would advise steering clear of shares in retailers unless they own brands loved by the super rich (Theo Fennell, for example).
However, there is also an upside. If you look out for vouchers for shops you want to shop in, make careful lists and stick to them you will save a fortune this Christmas: the big retailers have been making fortunes out of us for years, now seems as good a time as any to take your revenge.
First published in The Sunday Times, 10/12/2006