Discounting - The future
The RTT believes that the current levels of discounting and promotions in today’s financial climate are untenable long-term; unsustainable; and unhealthy for the retail sector.
The situation, the RTT warns, is now one of a self-perpetuating, vicious cycle, where margins for the retail industry as a whole - as well as those of their suppliers - are being negatively impacted.
Richard Hyman of Verdict Consulting highlighted this when he said: “2008 will be yet another year when rises in retailers’ costs will outstrip growth in their sales. Following years of cost cutting, most of the low hanging fruit from this source has already been picked. Driving top lines will increasingly determine retailers’ fortunes going forward. Since the opportunity to further drive sales volumes as in recent years is clearly receding, and since we have seen negative price inflation in the non-food sector, sales at higher price points are essential. However, this cannot happen without improved added value.” This is clearly contrary to the situation currently being seen in the sector, outside of food, in the UK. Mark Teale agreed, saying that it seems there is a current mindset that: “If prices don’t change (downwards), stock won’t move.”
Regulation, however, is not the answer, says the RTT, despite it being commonplace in some other European countries, where local or, indeed, national government determines when a sale can be held or has pre-set rules which require all items to be sold above cost.
However, the RTT firmly considers that a ‘rebalancing’ is required.
Vicky Redwood, Capital Economics added: “There is some merit in a return to the traditional model, with sales being used primarily for clearance purposes.” Not that this means that those whose proposition is based squarely on price will not have a place in the retail sector, particularly at times of difficult trading, such as now. It all is rooted in the basic proposition: ‘you get what you pay for’.
It was also noted though that there are instances where discounts and promotions can be useful in facilitating behaviour change. “Discounts and promotions can be used in a positive way,” stated Prof. John Dawson of the Universities of Edinburgh and Stirling. “For example, discounting or promoting fruit and vegetables as part of the five-a-day initiative can help to encourage healthier eating habits. No-one can argue against that.”
The RTT absolutely concedes that the use of discounting and promotional tactics have a place in modern retail and can be beneficial to consumers by increasing competition between retailers and ensuring prices are competitive. Equally they can create confusion for customers, a less satisfying in-store experience and diminish brand value. From the point of view of retailers, sales and promotions can be very valuable if used in the right way as a strategic tool with a clear objective. However, when used purely as a reactionary tactic, particularly under current market conditions, sales and promotions may not achieve the intended result and should be scrutinised more closely.
Leave a Comment
New to Marjo?
Access our catalogue now - it's easy!
Categories
Archives
Fair Trade
Our customers say:
One of my customers is desperate to replace an earring she lost - marriage is at stake. Can you please help (with the earring, not the marriage).
JD in DevonMarjo are proud members of the British Jewellers Association
