UK retailers turn to 'extreme bargains'

On many weekends, dozens of people line up in a nondescript alleyway in east London to shop at sample sales: designer clothing offered at discounts that typically stretch to 70% or more.

A few weeks back, while consumers were seeking bargains at a sale by luxury retailer Matches, solicitors were starting a form of insolvency proceedings for the brand. It came just months after the business had been acquired by Mike Ashley‘s retail empire.

Matches’ woes are the latest sign that retailers’ trouble is spreading across the Atlantic amid weaker consumer spending. Shops have been pushed to the breaking point after inflation has boosted their expenses and weighed on consumer spending, and even heavy discounting isn’t enough to save them.

“Even the strongest and highest profile brands up and down the country are struggling,” said Julie Palmer, a partner at consulting firm Begbies Traynor Group Plc, referring to the UK. She cited a “difficult macroeconomic environment, reduced discretionary consumer spending, higher interest rates and renewed supply chain challenges.”

The industry is still reeling from a disappointing Christmas season – the most critical period of the year for shops. Total sales in the UK grew a mere 1.7% in December, compared with about 7% a year earlier, according to a report by the British Retail Consortium and consultancy KPMG.

Another common thread among the companies struggling today is their relatively narrow focus, said Melissa Minkow, director of retail strategy at digital consultancy CI&T.

In the past several months, retailers Express Inc., Big Lots Inc., 99 Cents Only and more have all sought rescue financing or to restructure debt as sales lagged runaway expenses.

At the other end of the market, Matches is returning to the Hackney warehouse early next month with another discount sale.

“There is a market if you are a well-run, well-capitalized business which can give your customers what they want,” said Begbies Traynor’s Palmer. “Otherwise, there just isn’t enough appetite for all these retailers to exist.”

Harry Byrne

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