High street discount wars begin on biggest retail weekend

Some of the high street's biggest retailers have launched earlier and more comprehensive December sales than ever before as they battle for trade over this, the busiest shopping weekend of the year.

Tens of millions of people will visit the shops on Saturday and Sunday to buy their Christmas presents with store groups such as House of Fraser, Debenhams and French Connection already offering discounts of up to 50% on party dresses and key gifts such as makeup and perfume.

With consumers leaving their shopping later and later each year, the stakes are high for retailers, many of whom bank the lion's share of their profits at this time of year; this weekend Kent shopping centre Bluewater is predicting that 230,000 shoppers will come through its doors.

Independent retail analyst Nick Bubb said much of the discounting was planned by retailers in advance but that some deals were more aggressive than last year, forcing rivals to retaliate. John Lewis's "never knowingly undersold" pledge means it has to match the price cuts of competitors such as House of Fraser and Debenhams which are both running major promotions.

With many households left struggling to make ends meet in the aftermath of the recession, retailers have been forced to offer increasingly large, planned or otherwise, pre-Christmas discounts. With the exception of buoyant pockets such as the West End of London, industry data suggests that the crowds in shopping malls and on high streets around the country are smaller than last year as those fearful of overspending stay home or shop online to avoid impulse buys.

Some analysts argue that central London has become a shopping "bubble" where the crowds on major shopping arteries such as Oxford Street are spending as if it is pre-recession 2007.

"We think central London seems to be living up to its reputation as a 'bubble' largely insulated from the rest of the UK," said Capital Economics' Vicky Redwood, who also suggested that the weakness of the pound was attracting high-spending tourists to the city. "Anyone walking around central London would be forgiven for questioning whether the UK has actually been in a double-dip recession. Shops are crowded and restaurants are fully booked," she said.

While mid-market chains such as Marks & Spencer have been squeezed as middle England battens down the hatches, retailers serving the top and bottom ends have fared better. Value retailers have benefited from customers "trading down", while luxury retailers, which are concentrated in central London, have benefited from the spending power of their well-heeled clients being undiminished by the financial crisis.

Last weekend retailers in the West End rang up £150m in a warm-up spending spree, with Fortnum & Mason reporting its biggest ever Saturday and Liberty also claiming a bumper weekend. Jace Tyrell, of the New West End Company, which represents shops in Bond Street, Oxford Street and Regent Street, predicted this weekend would be huge. "Hoteliers are telling us there are a lot of tourists in London, particularly from northern Europe, and they spend a bit more," said Tyrell.

Selfridges retail director Sue West said it was a polarised trading picture, with luxury brands such as Yves Saint Laurent, Alexander McQueen and Michael Kors and expensive gadgetry such as tablets and headphones among its bestsellers.

Other areas were more difficult to gauge because of the blizzard of discounting in rival stores. West said there were clear signs of trading up, giving the example of a rise in goose sales of 30% in its food halls as shoppers switched to the more expensive meat.

"It's everywhere you look, in every category. Furby is one of the bestselling toys and it costs £70 to £80. People are buying fewer, more expensive gifts." A third of Selfridges shoppers are from overseas and West said demand from this group was growing more quickly than from domestic shoppers.

Retail sales growth in the capital's shopping district has outstripped the rest of the country in recent months, with London retail sales for November up 2.3% on last year, while the national figure was up by just 0.4%. Shoppers are attracted to the West End by the festive atmosphere created by the Christmas lights and the window extravaganzas of the major department stores, says Tyrell.

Harrods has gone to town this year, enlisting an army of fairytale princesses, including Rapunzel, Snow White and Cinderella, clad in ballgowns from the likes of Versace and Oscar de la Renta. "People have had five years of recession and want the feelgood factor," said Tyrell. "These stores have been doing Christmas for 100 years and there's been more investment in everything from the in-store decorations to customer service experience and the quality of the windows."