Discounting - The City view

 

The RTT agrees that the City focuses very heavily on like-for-like sales growth figures as a barometer of the success of retailers.

 

Tim Denison of SPSL summed this up when he said: “The City should be encouraging retailers to increase margins, not sales at any cost. Retailing is a business like every other. Unfortunately it’s far too easy to be fixated on sales figures.”

The group feel that the City is, on the whole, unimpressed by ‘blanket’ discounting, but views discounting for strategic purposes somewhat more favourably. “It can be an art,” said Nick Bubb. “The City admires the sales and discounting process if it has the right effect on the bottom line.” The RTT observes that many retailers are admired for ‘holding firm’ and having a very structured sales ’season’ and still using sales to move surplus stock.

 

It is however, quite understandable why the City concentrates on sales-derived performance. It simply does not have the benefit of transparency in the relationships between retailers’ revenues and their gross margins and therefore cannot make fair comparisons between different companies and their tactics. Helen Dickinson observed: “There are no requirements for retailers to disclose gross sales before discounts or the impact of discounts on their gross margins and there is little consistency between what costs over-and-above the cost of sales retailers include in their margins.”

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