"Heavy discounting is a risky strategy" for British retailers

The latest British Retail Consortium Retail Sales Monitor published earlier this week

highlighted signs of an consumer driven economic recovery, with British retail sales increasing at the fastest pace in close to four year last month. However, some industry insiders remain wary despite the positive growth, noting that the strong growth in retail sales in January playing catch-up to a weak December and influenced by the wide spread discounting which was implemented by a number of retailers.

David McCorquodale, head of retail at KPMG noted that some British retailers "had to discount heavily to secure these sales and will now be counting the cost of this strategy." Gideon Lask, CEO and founder of Buyapowa, social commerce business, warns that this could be a serious issue for retailers in the year to come and warns against taking the BRC retail sales monitor results as face value.

"It is great to see such strong sales results being reported within the retail sector to kick off 2014. However, generating such figures through heavy discounts, as (according to KPMG) many retailers have done, is a risky strategy that has distorted these results to appear stronger than they are," says Lask.

He adds that ongoing heavy discounting does not generate brand loyalty among British consumers, but instead attracts 'deal-hunters' who may never return to purchase from the retailer or label again. Lask believes that retailers need to move away from generic discounting and supplement it with smart rewarding in order to ensure success retail sales all year round.

"By ramping up their customer engagement around core business goals, retailers can continue to offer exciting promotions without decimating their margins or damaging the ongoing price-perception of their products." Lask highlights that one of the most successful retailers are busy turning product sales into vibrant events, such Selfridge's and its Festival of Imagination campaign.

He stresses that retailers need to "break free from the notion of static pricing" to sustain sales and should consider being more flexible with pricing dynamics and "only hand out discounts when customers earn them".

Official retail sales data from the Office for National Statistics for the month of January are set to be released February 20.