Matchesfashion’s insolvency spotlights the troubles many retailers face as persistently high inflation takes its toll on consumer spending.
Retailers Offering Massive Discounts to Keep Consumers in Spending Mode
Bloomberg reports that many luxury brands are offering extreme discounts to revive consumer interest.
The Frasers Group PLC (FRAS.L) bought Matches in December 2023 for £52m but placed it under administration less than three months after the acquisition. The administrators are reportedly seeking new buyers for the company.
Bloomberg reported that some consumer bargains are discounted at 70% or more. The pandemic and associated inflation rates affected both retailer expenses and consumer spending. Experts feel the surge in discounts would not be enough to keep some shops afloat.
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Weak Christmas spending, typically the highlight of the retail finance calendar, further hobbled the retail market. Based on a British Retail Consortium and KPMG report, the UK’s year-on-year sales increased by just 1.7% as opposed to the 2022 growth of 7%.
Julie Palmer, a Begbies Traynor Group Plc (BEG.L) partner, told Bloomberg that even the most prominent brands are battling in this “difficult macroeconomic” climate with its “reduced discretionary consumer spending, higher interest rates and renewed supply chain challenges”.
The US mirrored this situation with its weaker start-of-year spending and higher-than-expected inflation rate. Bloomberg quoted Melissa Minkow, the director of retail strategy at CI&T, who said:
So much of this is specialty retail, and if you’re going to sit in a niche space, you have to do that better than anyone to both survive and thrive.
