The sight of scared consumers queuing up in their thousands to withdraw their cash from troubled Northern Rock might turn out to be almost as bad news for retailers as it was for the bank.
Savers have withdrawn about£2 billion, fearful of losing everything despite reassuring statements from the Government and Bank of England. The scenes on the high street were reminiscent of a Third World financial crisis, or the great depression of the 1930s. They showed how fragile people’s sense of financial security is and would have put the frighteners on many more consumers than were directly affected.
And it all came as retailers gear up for the most important selling period of the year, the Christmas season – and the only time that some retailers make a profit.
The spending spree of recent years has been powered by the house-price boom, but the prospect of higher mortgage payments, lower house prices and tougher credit terms means that the good times might no longer roll.
Last week, several retailers, including John Lewis Partnership, Next and Home Retail, all warned that the outlook for the rest of this year was unsettled. But who would have thought that the coda to their comments would be the panicked crowds outside the doors of Northern Rock?
Before getting too gloomy, it’s worth recalling that shoppers have proved reluctant previously to hold back on Christmas spending, preferring instead to enjoy one last blowout before reining in. Retailers will need to go all-out this year to win every possible penny of spend. While they will hope to get shoppers to trade up, they will also need to be seen to offer great value for money – there will need to be a real sense of wow.
It’s too early to say how difficult this Christmas will be, or whether the pervading gloom will dissipate. But something suggests that the promotions could start earlier than ever.
No comments yet