It’s bah, humbug at Debenhams while Christmas tills ring at discount retailers

With a week to go before December 25th, there’s all still to play for in the stressed-out retail sector, as shoppers and storekeepers engage in their traditional Christmas game of cat and mouse.

The strain is starting to show among some retailers, notably Debenhams, which is doing its bit to keep the memory of Ebenezer Scrooge alive by abruptly demanding a hefty discount from its suppliers.

In an email to own-brand suppliers on Monday evening, the department store chain called for a discount of 2.5 per cent on goods, as well as a one-off fee of 2.5 per cent on outstanding sales. That is a sizeable rebate to ask for at any time of year, let alone at Christmas, when the financial pressures are greatest.

The shocked suppliers appear to have had little say in the matter, as Debenhams informed them the cash would be taken from their bank accounts within 24 hours. Ho, ho, ho.

Debenhams said it was seeking the “contribution” because of the mutual benefits its suppliers will reap from the store group’s growth. But the move smacks of panic and the real motivation is almost certainly a lack of growth, something that is reflected in Debenhams’ share price, which has lost 25 per cent of its value over the past year as the group struggles to win sales.

The discount may just help Debenhams scrape through the Christmas reporting season with respectable numbers but it will have some bridges to build with its suppliers in the new year.

There have been other signs of hard times in the sector. Morrisons has even stopped cleaning the windows in an effort to conserve cash. Like Debenhams, Morrisons has been losing sales to rivals and has clearly been casting around for ways to save money, and window cleaning has been suspended until the end of the group’s financial year in early February.

Explaining the move, the supermarket group said clean windows were less of a priority “at the darkest time of the year”.

A number of retailers have already lost their nerve in the run-up to the big day, particularly in the fashion sector. New Look, French Connection, House of Fraser, H&M, Top Shop and others have been offering discounts of 25 per cent to 30 per cent, or even 50 per cent in some cases.

Consumers have come to expect prices to be cut as Christmas draws nearer, but the promotional activity this year has come earlier than in the past, and the discounts are deeper and more widespread.

The cut-throat battle for sales is also being seen at the petrol pumps, as Asda last night cut its prices by 2p a litre to their lowest level this year. It was swiftly followed by rivals Tesco, Sainsbury's and Morrisons. Consumer groups welcomed the reductions but warned customers they were unlikely to last and that the latest petrol price skirmish was all part of the desperate battle to lure shoppers into the stores over the next seven days.

Aldi and Lidl
A week is a long time in retail, particularly at Christmas, and it's still too early to say for sure who'll be the real losers this year. But there are already some clear winners: the discount food retailers. The remarkable rise of German- owned chains Aldi and Lidl has been one of the stand-out features of the retail sector this year, as cash-strapped shoppers increasingly seek out better value.

Latest figures from retail research firm Kantar Worldpanel suggest that more than half of British households have visited an Aldi or Lidl over the past three months, a record number. The rise of no-frills discounters has been at the expense of the "big four" chains – Tesco, Asda, Sainsbury's and Morrisons – all of which have lost market share.

Aldi in particular is rapidly becoming a middle-class favourite, with the introduction of luxury lines such as lobster tails on offer for less than a tenner. Its mince pies, just £1.69 (€1.99) for six, were recently voted tastier than Fortnum & Mason’s luxury pies at £12.95 for half a dozen. And earlier this month, Aldi stores were mobbed by shoppers wanting to snap up one of the best bargains around this Christmas: an £80 tablet, which sold out within 24 hours.

The Kantar figures show that the upmarket Waitrose chain is faring better than the big four under the onslaught of the discounters, with its market share rising from 4.5 per cent to 4.7 per cent. Aldi's share rose from 3.2 per cent to 4 per cent. If it continues at that rate, Aldi will overtake Waitrose by this time next year.

Fiona Walsh is business editor of theguardian.com