LONDON BRIEFING:WITH JUST 36 days to go until Christmas, the battle for festive spending is already well under way on the High Street. Today Debenhams launches a £250 million (€282.6 million) four-day sale, offering discounts of up to 50 per cent, as it attempts to steal business from its rivals. Last week Asda and Tesco announced price cuts on thousands of lines, worth a combined £400 million to customers, writes FIONA WALSH
It may look like a pre-Christmas price war but the promotions will have been long planned by the retailers - and the hit on their margins factored in - as part of the now traditional cat-and-mouse game between shoppers and the stores in the run-up to December 25th. Customers leave their buying as late as they dare in the hope of securing extra discounts while the retailers try to whip up interest with promotions, accompanied by vague threats that stocks of the best-selling lines may sell out before the big day.
Posturing is part of the job in the retailer's run-up to Christmas and Debenhams says its rivals will be forced to respond to its promotion.
Marks & Spencer's Sir Stuart Rose, however, has made it clear he has no intention of getting Britain's biggest clothing retailer embroiled in an all-out price war this time round, although the group does promise some "tactical promotions" over the coming month. For the past two years M&S has joined in the pre-Christmas price-cuts by holding "one-day spectaculars" with discounts of 20 per cent.
This time a year ago, the High Street was shrouded in gloom - Woolworths was teetering on the brink of collapse, eventually crumbling into administration less than a month before Christmas, followed by furniture retailer MFI, the entertainment retailer Zavvi, better known under its former name Virgin Megastores, tea and coffee retailer Whittards of Chelsea and the DIY retailer Fads. Scores of lesser-known retailers suffered the same fate, unable to hold on even until Christmas Eve.
There have been retail failures this year - the Thresher off-licence chain fell into administration late last month - but the scale of retail collapses will be nothing like last year.
The weaker firms have already gone under and a large proportion of the £2 billion of sales that were rung up by Woolworths have been redistributed around its high street rivals. Retailers such as HMV, Argos and, of course, the supermarkets, have picked up the slack in toys and entertainment. So, with memories of the credit crunch just starting to dim, is the retail sector set for a brighter Christmas this year? As usual, it depends who you ask. Just as the retailers' tactics differ - M&S has launched its usual glitzy advertising campaign while Next has decided against TV adverts - so too do the forecasts for Christmas spending.
John Lewis raised the sector's hopes with a stunning set of sales figures - takings soared by 17 per cent last week, which it said showed that Christmas shopping had begun in earnest. And the British Retail Consortium, emboldened by a 4.2 per cent rise in central London shop sales in October, is confident the sector is in line for a brighter Christmas.
Not everyone agrees. The respected retail consultancy Verdict believes that far from setting its usual record, spending could actually go into reverse this Christmas for the first time in 20 years or more. The biggest factor, it says, will be reduced spending on housing-related goods, reflecting the prolonged downturn in the housing market. Non-food sales will also be hit by the temporary reduction in the rate of Vat from 17.5 per cent to 15 per cent last December.
Shoppers will be cutting back on entertainment and eating out, although Verdict believes households will still push the boat out on traditional festive fare to eat at home, pushing up grocery sales. The urge to splash out on treats for the family will be boosted by what Verdict analyst Maureen Hinton terms "temporary recession fatigue" with families determined to enjoy themselves after a miserable year.
Overall, Verdict forecasts a spending decline of 0.7 per cent on 2008, or £500 million, in the vital final quarter of the year, made up by a £1 billion drop in housing-related sectors and only partially offset by increases on the grocery side.
If Verdict's forecasts are proved right, we might just see the Church of England take some credit. Fed up, perhaps, of the High Street's hijacking of Christmas, the Church of England has strayed outside its traditional territory by launching a series of videos offering money-saving tips to shoppers. Wishing You an Affordable Christmas is part of the church's post-credit crunch debt initiative. It advises people to use cash instead of cards and - music to Debenhams' ears, no doubt - to shop early to avoid expensive panic buying.
Fiona Walsh writes for the Guardiannewspaper in London
