Tracking the January Sales and whether retail prices are decreasing

Traditionally the biggest promotional event of the year and best chance for retailers to offload surplus stock in the wake of Christmas, the January Sales have lost much of their power since Black Friday and Cyber Monday came along.  

Some recent signs have suggested that they still have an impact. Last week’s BRC-Nielsen Shop Price Index showed that prices declined 0.7% year on year in January, with chief executive Helen Dickinson citing “deep discounts”, particularly in furniture and clothing.  

Kantar also said that grocery price inflation was slowing, with 27.2% of take-home grocery sales going to promotional products. That is the highest level since 2021 and spending on own-label products also reached record levels. The return of Asda’s rollback and John Lewis’ price promise demonstrated that retailers are taking an aggressive public position on pricing in response to consumers feeling pinched.

With all these headlines, an industry observer could be forgiven for thinking that 2025 may not be so bad and price rises might be limited. Here is why that is probably not true.

December-to-January price drops muted 

Discounts were happening in January, but the overall seasonal picture is one of deep promotions during the festive period running along into the new year. While usually the year-on-year figures are more instructive, it is worth looking at the month-on-month picture too in this case.  

According to the Shop Price Index numbers, clothing and footwear was 1.5% cheaper in January than in December while furniture and floor covering was 2.5% down on the month before. No other categories declined by over 1%.  

The year-on-year comparison shows clothing prices declining (as they have been for some time) and smaller drops in a few other categories, but it is important to note that this is just one of several measures of price inflation. According to the ONS Consumer Prices Index, prices increased by 2.5% year on year in December (excluding housing costs).  

While inflation in clothing and footwear has slowed in recent months, according to the ONS, prices have still ultimately gone up since 2023. The ONS does, however, show furniture and household goods prices were 0.3% lower in December than in the year before.  

PwC senior retail adviser Kien Tan said that in the categories where deflation exists the picture is unlikely to be lasting. 

“Firstly, retailers will lap the anniversary of the biggest price declines, so comparative numbers will be lower. Secondly, all the cost headwinds being faced by retailers… mean that some of these will need to be passed on to consumers,” explained Tan. 

Adobe also shared the online picture, which showed the best January discounts could be found in apparel (5.2% month on month), furniture (-2.9%), sporting goods (-1.9%) and appliances (-1.2%). The Adobe Insights team revealed that the picture was very much one of prices hanging near December levels as retailers kept prices competitive following record online spending.  

“There has not been enormous overhang of stock,” said Retail Economics chief executive Richard Lim. Adding that “Boxing day and January Sales are not at the same level of importance from a promotional perspective that they used to be a few years ago”. 

Brand positioning makes promo a headache 

Given the context of consumers looking to reduce their spending, a surprising statistic on fashion was that discount Sales fared worse in the 12 weeks to January 8 (4.4% decline) than full-price sales (0.6% decline). 

There were some exceptions. M&S had its highest market share of discounted womenswear Sales since April 2021, according to Kantar fashion analyst Scarlet McNicol, with their menswear Sales also resonating with consumers. Amazon also upped volumes on fashion products sold on markdown.  

“Many retailers are trying to move away from heavily discounting… because margins are so tight,” said McNicol, “and actually if we continue to erode those margins with discounts then we’re going to be left in very deep water.” 

There has without a doubt been some easing of price pressures on retail manufacturers. Energy costs have declined from crisis levels and freight rates are down too after trouble in the Red Sea eased, for example.  

That is unlikely to be enough for most retailers, given the costs of employees are such a big part of the puzzle. As Next set out so clearly in their earnings results in January, the quadruple whammy of inflation, a higher National Living Wage, changes to the National Insurance threshold plus an increase in the NI rate all add up to a circa 8% increase in labour costs.  

So, the best advice for consumers is that if you see a bargain in whatever remains of the January Sales, you should grab it while you can. All signs suggest that in 2025, the only way is up.