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What is going in retail? The industry is looking increasingly stressed. In the run-in to Christmas I described retail as being in panic mode, and the weeks since have reinforced that view. The body language and behaviour of so many in the industry betrays anxiety and uncertainty.

Black Friday has merely been the most eye-catching discount day during a year that has become progressively price-driven. Online retailers tell me they struggle to meet their revenue targets without running a promotion of some kind – what can they say to their customers if it is not tied to a price offer? Physical stores are not too different. Windows are increasingly plastered with sale offers and 2014 was by the most price-driven year in food and non-food I can ever recall.

An increasing number of retailers are feeling pressured and are less confident about their ability to reach out to customers with a compelling offer without adding the drug of price. And this is a vicious circle because the more you promote the more reluctant are your customers to buy at full price. A growing minority have tangible added value they can communicate through windows, on the sales floor and on websites. Social media and Big Data are positioned as hugely significant. Maybe they are but I mostly see retailers not really knowing what to say to their customers unless it’s about price. It is the message, not the medium, that is key.

As we welcome the New Retail Year and consider the outlook, there is the usual mixture of total unknowns and total certainties ahead. One of the latter is around price. 2014 became increasingly price-led and the New Year is certain to be even more so. In 30+ years in and around retail I have never seen a market where price is so dominant and deeply embedded in customer behaviour.

I believe there are three key drivers here. The first is economic. Household budgets are squeezed between static real incomes and rising costs. Factors like PPI payouts, dipping into savings and falling petrol prices have helped mask the underlying weakness of demand, but it’s there nevertheless. The second concerns the relentless growth in online. The internet is changing the economics of retailing and because it is a materially lower margin distribution channel, it relies far more on lower prices, promotions and discounts than its physical equivalent. The relentless growth of online retail has helped to make  the industry much more promotional. And the last key driver is retailers themselves. The expansion of value players and discounters has forced mainstream players to lower prices to compete.

The minority of retailers who have resisted the temptation to discount beyond their strategic promotional calendar are generally the ones in better shape. Those that have embraced discount days and using price cuts will find it often difficult to persuade customers to buy at full price. Each of the three divers I have discussed here will be very much to the fore in 2015.  I think there is every prospect of the New Year being even more price-driven than the last.

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.