Retailers losing trust in cut to fit discount strategy
(James Quilter)
The old adage about the implausibility of free lunches also applies to supermarket promotions. Shoppers are bombarded with deals from the moment they step into a store but they are unaware of the hidden cost-a situation highlighted last week when retail giant Tesco was accused of doubling the price of fruit before offering it at 50% off for its Fruit & Veg Pledge days later.
On an average shopping trip, discounted goods account for about 25% of purchases, according to AC Nielsen, and on the whole, consumers believe they are receiving a genuine discount.
However, as more exposes run in the mainstream media about the way discounting is achieved; supermarkets run the risk of damaging confidence in their brands as well as their offers.
Tesco denies that it has been artificially raising prices before discounting and insists the majority of the figures quoted in the national press were incorrect. But even if Tesco had been guilty of such misleading practices, it would not have broken any laws. The only legislation on the subject relates to the discounting and sale of non-food, non-perishable goods. And in the case of non-food, retailers such as DFS and Carpet right have to feature the discounted product for 28 days in only one store at the higher price.
The Trading Standards Institute, which polices pricing legislation, says artificial price increases are an integral part of retailing. "If you see a price reduction of 30%, the chances are that it is 30% off the price a store in Edinburgh - and this is done by the bigger, more respectable companies as well as smaller ones, says a spokesman for the body. "The trouble with the current pricing rode is that has not kept pace with new marketing techniques.”
Tesco raised the price of its plums from £1.48 for 500g to £2.99 three days before reducing prices by 50%. However a spokesman insisted the accusation that the store's pricing team worked out its price promotions to keep products at the same price was ‘insulting’. Like rivals Sainsbury's and Asda, it insisted that the same prices run in its main supermarkets across the country.
Simon Hathaway, managing director of retail specialist Saatchi & Saatchi X, says discounting has become part of the business model for many retailers, especially those in the furnishing sector. He believes that much of this is driven by retailers taking advantage of consumers' ignorance of the price of many products. ‘If you asked 20 people the price of a pint of milk, you would get 20 different answers’, he says.
"The Practice of Raising Prices to Promote Discounts Shortly ¬After Risks Damaging Brand Trust"
(James Quilter)
The old adage about the implausibility of free lunches also applies to supermarket promotions. Shoppers are bombarded with deals from the moment they step into a store but they are unaware of the hidden cost-a situation highlighted last week when retail giant Tesco was accused of doubling the price of fruit before offering it at 50% off for its Fruit & Veg Pledge days later.
On an average shopping trip, discounted goods account for about 25% of purchases, according to AC Nielsen, and on the whole, consumers believe they are receiving a genuine discount.
However, as more exposes run in the mainstream media about the way discounting is achieved; supermarkets run the risk of damaging confidence in their brands as well as their offers.
Tesco denies that it has been artificially raising prices before discounting and insists the majority of the figures quoted in the national press were incorrect. But even if Tesco had been guilty of such misleading practices, it would not have broken any laws. The only legislation on the subject relates to the discounting and sale of non-food, non-perishable goods. And in the case of non-food, retailers such as DFS and Carpet right have to feature the discounted product for 28 days in only one store at the higher price.
The Trading Standards Institute, which polices pricing legislation, says artificial price increases are an integral part of retailing. "If you see a price reduction of 30%, the chances are that it is 30% off the price a store in Edinburgh - and this is done by the bigger, more respectable companies as well as smaller ones, says a spokesman for the body. "The trouble with the current pricing rode is that has not kept pace with new marketing techniques.”
Tesco raised the price of its plums from £1.48 for 500g to £2.99 three days before reducing prices by 50%. However a spokesman insisted the accusation that the store's pricing team worked out its price promotions to keep products at the same price was ‘insulting’. Like rivals Sainsbury's and Asda, it insisted that the same prices run in its main supermarkets across the country.
Simon Hathaway, managing director of retail specialist Saatchi & Saatchi X, says discounting has become part of the business model for many retailers, especially those in the furnishing sector. He believes that much of this is driven by retailers taking advantage of consumers' ignorance of the price of many products. ‘If you asked 20 people the price of a pint of milk, you would get 20 different answers’, he says.
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