Xmas Discounting 'Strongest For Seven Years'

The scale of the discounting deployed by stores to attract Christmas shoppers has been laid bare in a report which identified a "double whammy of good news" for consumers.

According to a survey by the British Retail Consortium (BRC) and researchers Nielsen, prices fell at their fastest rate for at least seven years last month.

It found that high street shops and supermarkets resorted to aggressive discounting to boost festive sales - a sign that many chains were concerned about business volumes in the run up to Christmas.

The BRC said overall shop prices fell by 0.8%, dropping for the eighth consecutive month and at the fastest pace since its survey began in December 2006.

Households were offered some welcome respite as food price inflation slowed to its lowest level for more than three years - at 1.7% - while widespread discounting in the wider retail sector saw non-food prices fall by 2.3%.

Mike Watkins, head of retail and business insight at Nielsen, said: "This will have brought a festive cheer to shoppers filling their trolleys with food and drink at supermarkets, especially as Christmas fell later this year.

"With the continuation of price cuts and promotions across all of retailing, and with many shoppers holding back on shopping to the last week, there will have been bargains and some great savings for the savvy Christmas shopper."

But plunging prices are likely to have taken their toll on many retailers , with food chains in particular expected to have seen their profits hit.

The BRC said weak sales in the lead-up to Christmas led to higher than normal promotional activity as retailers fought over market share.

"While inflationary pressure in the supply chain remains benign, deep and widespread discounts have come at the expenses of profit margins," it said.

Trading figures so far from retailers have revealed the pressure to discount in a highly competitive Christmas.

Debenhams (Other OTC: DBHSY - news) last week issued a profits warning after disappointing festive sales forced it to slash prices, while Marks & Spencer (Other OTC: MAKSF - news) also launched a major sale, rolling out its 'Mega Day' on the Saturday (Shenzhen: 002291.SZ - news) before Christmas, with 30% reductions across clothing lines.

The BRC-Nielsen data showed prices fell across clothing and footwear, electricals and furniture and floorings, while the cost of books, entertainment and home improvement products also dropped to attract shoppers preparing for the festive break.

But the non-food price figures were also impacted by the inclusion of Cyber Monday early last month, which led many high street stores to follow the lead of their online rivals with hefty promotions.

In food shops, the best deals were found on alcoholic and soft drinks.

:: Watch Sky News live on television, on Sky channel 501, Virgin Media channel 602, Freeview channel 82 and Freesat channel 202.