SHOPPING events such as Black Friday and Cyber Monday could be pushing retails into an unsustainable cycle of discounting, an insolvency lawyer has warned.
Addi Shamash, senior associate in the corporate restructuring practice at HBJ Gateley, suggests that while retailers may get a short term lift in sales the ongoing repercussions could be more serious.
Ms Shamash indicated a cycle of earlier festive spending may also make January, already a high month for corporate insolvencies, even tougher for some high street outlets.
She said: "If everyone has spent their Christmas and January budgets now, they might be less likely to spend more in the coming weeks.
"This could force retailers to continue heavy discounting even after the usual New Year sales, leaving them facing a black month of poor returns at the tills."
While ongoing discounts may be popular with consumers Ms Shamash believes that trend is not entirely positive.
She said: "Forced discounting will ultimately have a stifling effect on retail competition by squeezing independents out of the market and standardising merchandise offers across the larger chains. This will likely mean less choice, albeit it at lower prices, for consumers.
"However, such a shift in the landscape could be positive for smaller and more bespoke retailers, as shoppers seek to spend leftover discretionary funds on more tailored or personalised goods. The rise of websites such as Etsy.com and NotOnTheHighStreet.com could be seen as testament to increasing interest in bespoke and limited edition items."
Ms Shamash added that each retailer must work out what works for them.
She said: "Taking a balanced approach to pricing throughout the year could be useful in driving loyalty, yes, but businesses will still need to weather the storm of discount frenzies with much more flexibility than ever before."
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