Shoppers rushing into stores early on Friday have staged the busiest "Boxing Day" in living memory in Britain as retailers slashed prices. But even strong sales might not be enough to save the industry from a severe slowdown as the U.K. heads towards a deep and protracted recession.

General retailer John Lewis said Friday that its sales rose 2.5% in the four days up to Christmas Eve, having experienced the highest-ever Christmas day online orders with a 12.0% increase year-on-year, according to TradeTheNews.com. Christmas day traffic on its Web site was 12 times higher than last year, with pillows, Molton Brown products and televisions the most popular online clearance purchases so far, the department store chain said.

John Lewis was not the only business experiencing high holiday sales. Harvey Nichols and Selfridges, among others, reported long lines of customers anxiously waiting to make the best on offers. "People were running into the store and grabbing bags. Some women had four of five bags in their hands," a spokeswoman for Selfridges said. "Security had to get more people down to the store to help... I've never seen anything like it.” Some stores were offering discounts of as much as 90.0%.

Despite the last-minute surge in sales, the British Retail Consortium (BRC) said it had been "a poor Christmas" for the sector. "Discounts and promotions on a scale unprecedented for the run-up to Christmas combined with weak sales have put margins under severe pressure,” said Stephen Robertson, BRC director general. "Government must recognize that every extra tax and regulation has an impact on prices, under-pressure customers and retailers."

Top Story

Deck the Stores with Bargains

Deep discounts on retail prices for apparel, jewelry, electronics, and even opera fail to excite consumers wary of losing their jobs

• Plus: Small Retailers Push
  for Online Sales
  
  

The bargains sweeping America are increasing, and they're not just Citigroup (C) shares under 4 and Dell (DELL) around 9. From apparel to autos, 10% or 20% price reductions no longer cut it—deals of half-off and more are flourishing in a growing number of industries as manufacturers and retailers plot an uncertain future in the midst of a near certain sales calamity.

In other words, anyone willing to spend can pick up some incredible bargains. "We are looking at a pretty deep recession. In this environment, retailers have zero pricing power," says Nariman Behravesh, chief economist for research firm IHS Global Insight. "They are going to be discounting like crazy. We are going to be looking at a pretty nasty Christmas season."

Shoppers will find some of the most aggressive discounts at apparel and department stores. Most chains took heavy blows in October, with department stores seeing an almost 13% sales decline at locations open for at least a year, a closely followed barometer known as same-store sales. J.C. Penney's (JCP) "Biggest Sale of Them All" has some items marked down 60%, and Gap's (GPS) three brands—Gap, Old Navy, and Banana Republic—each currently boast deep discounts, with some items slashed by as much as 70% at Gap stores.

Jewelry Bargains Galore

At a midtown Manhattan Banana Republic outlet Friday afternoon, sales staff outnumbered customers. Agnes Curmi, a 54-year-old mother of four, says the sales don't entice her as much as they once did. "You don't know what's going to come tomorrow," Curmi said. "You don't know if your husband is going to have a job or not."

Apparel is not the only area in which consumers can expect generous discounts. Luxury and discretionary goods such as jewelry, electronics, and sports cars have suffered significant sales declines in recent months, leaving retailers with no choice but to lower prices to help move merchandise. Chicago-based Whitehall Jewelers, which filed for bankruptcy in June, is closing its 375 stores and liquidating $500 million worth of gold, diamonds, and other items, with prices up to 75% off.

While jewelers typically have more control over pricing than other retailers because their inventory turns over less frequently, liquidation sales such as the one at Whitehall have a ripple effect that can make it harder for competitors to maintain profit margins of 50% or more. "It sets up a value expectation and the economy just reinforces that," says Nick White, president of White & Co., a Kentucky-based custom jeweler, who also serves as an industry consultant at Gerson Lehrman Group. With jewelry sales predicted to fall as much as 10% this holiday, from 2007 levels, price drops are inevitable well into next year. Yearend shopping is the most important selling period for jewelers.

Breaking the $400 Threshold

Vying for the same consumers are electronics retailers, which have significantly lowered prices on big-ticket items this season. Popular high-priced electronics such as Blu-ray DVD players and PCs can be had for roughly the same price that an Apple iPhone or camcorder would have cost a year ago. Typically purchased for their features, rather than their brand name, such items as HDTVs, laptops, and portable GPS navigators are being offered by lower-end manufacturers marketing more affordable models.