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Tomorrow will see Next’s Christmas trading statement announced, the first from the major retailers. It will trigger the inevitable attempts to extrapolate from this an industry-wide view of business over the festive season. Next’s is always one of the more meaningful statements to emerge, and that in itself renders it unrepresentative. So many are rather variable in definitions, and making company or year on year comparisons can be misleading. Another key factor likely to mislead is that the company was one of the few not to engage in Black Friday or any other margin-damaging pre-Christmas discounting. And yet another is that Next is one of the sector’s strongest players with a very strong brand, fully integrated multi-channel strategy and a totally consistent relationship with its customers.

One of the most common errors of interpretation made with Christmas trading statements is to attach the same significance to each company. Relativity is everything. Strong numbers from a tiny player are eclipsed by weak ones from a much larger business, and vice versa. As each successive business reports, views of their significance needs to take full account of their relative size.

Next will have been one of the stronger performers. A critical element of the story of Christmas trading is of course margins. The unprecedented discounting will have huge repercussions and many will have paid a very heavy price for clawing sales forward.

Walking down Oxford Street today is sobering. It’s the 22nd December and not surprisingly, it’s very busy indeed. What is harder to assimilate is the fact that around 50% of the retailers on the street have sales on. This is a central theme of the sometimes crazy and very erratic retail world we live in  today. We were told that the UK economy was the strongest growing in the developed world.  UK consumers don’t believe this for a second and the latest economic statistics out today confirm this. Soft demand has prompted a massive slice of the retail market to forgo full prices as we enter THE key selling days of the year.

As 2014 has unfolded so retail has become progressively more anxious and nervous. And it’s not just food retailers that are acting like rabbits in the headlights. Those Oxford Street traders exhibit a body language that suggests a desperation to turn stock into cash, come what may. It is all about sales today and margin is secondary. My interpretation is that many retailers are entering Christmas with far too much stock and are very worried about the January sales. So many embraced Black Friday and while there have been very upbeat messages from some, spend is very finite. Short termism will have  brought business forward, and at lower margins. This will prove to have been a deal not worth doing, especially because it will have alienated customers.

It’s very hard to see how Christmas trade can be anything other than disappointing with so many retailers on sale. Many of the trading statements will be even more unreliable than they have been in the past. The temptation for wishful thinking to influence the numbers will be too much for some and shifting definitions and timeframes may well figure prominently.

The last set of grocery market shares pre-Christmas show a slowdown in decline at Tesco. Some are hailing this as the sign that Tesco is past the worst but this may well be premature. The general story of this latest batch of numbers is more of the same. Waitrose continues to motor along. Aldi and Lidl have registered (again) their record combined share. And the big four have all lost further ground, Asda a bit more than last time and Tesco a bit less.

The problem with identfying a trend in this is the mountain of special offers, promotions and vouchering which is peaking as Christmas gets closer. “Buying market share” is always happening to a greater or lesser extent in this market but is at its peak right now. And these latest shares reflect this. The major resetting of economics in this market has yet to happen in my view. If Tesco is to take back control of its own agenda it must first restructure and shape its operational management for the battle ahead. This battle will be even more price-driven than we are seeing now. Tesco has started readying itself for this and 2015 promises to be a defining year for the market.

The Chancellor has welcomed a “major moment in the British recovery” as real wages outstripped prices in the three months to October. Real wages grew by 1.4% while prices increased by 1.3%. This improvement is to be welcomed and the timing is perfect, just as retail reaches the critical moment of the year. But how meaningful and sustainable is it?

The reality is that this has more to do with falling inflation than rising incomes. While wages are without doubt moving in the right direction, progress is slow and tiny. On the other side of the equation, inflation is falling, particularly in retail. This in turn reflects intense competition and relatively soft demand. And the latter suggests that a whisker more spending power is unlikely to translate into stronger retail demand.

The retail recovery of 2014 has been real but built on short term, unsustainable factors. Consumers have dipped into savings, have enjoyed a fillip to disposable incomes from PPI payouts and are now enjoying some help from falling petrol prices. To really celebrate, Mr Osborne needs a lasting recovery built on organic strengthening rather than fortuitous one off external events.

Today’s profit warning from Tesco (its fourth this year) is estimated to translate to a UK profit margin of 1.5%. More detail of exactly what is behind the margin reset is promised in January, and it will take much longer still to see how its new competitive stance fares in the marketplace. This is just the latest in the progressive redrawing of the economic battleground of UK grocery retailing.

There are several huge questions prompted by this. Does this number reflect in full the scale of war chest needed to finance what Dave Lewis sees as the required lowering of prices to regain control of Tesco’s competitive agenda? If so, is it enough? And does 1.5% represent the new normal margin in UK food retailing?  What will the knock on effect of all of this for the other players?

This is all much nearer the beginning than the end of the story of seismic change in UK grocery retailing. And by the way, given their massive share of non-foods, it would be a huge mistake to think that what is happening is confined to grocery.