Speculation, Fact and Fiction

Pals and other unfortunates at conventions and the like will have become accustomed to me explaining in detail just how damaging the 3for2/Buy-one-get-one-free/half-price model of bookselling has become. Of course, this mania for discounting isn't only limited to the booktrade as a glance along any high street will show.

Today we have, via TheRetailBulletin.com

The KPMG/SPSL Retail Think Tank has warned that the current retail culture of constant discounting, sales and promotions is unsustainable and likely to lead to increasing numbers of insolvencies. Retail in the UK is at a turning point and requires a new set of strategies to survive.

The key points of their paper are

The use of sales, promotions and discounting has fundamentally changed away from a pure clearance role to a range of more tactical and reactive purposes.

Sales, promotions and discounting affect shopping behaviour in a way that can be detrimental to the sector. It also has the potential to erode both retailer brands and the in-store experience.

There is a lack of transparency of the level or the effect of promotional activity on retailer health or future prospects.

If discounting programmes continue on their present path, the situation runs the risk of becoming untenable for retailers in the longer term.

Over recent years, sales growth by value has slowed while sales by volume have increased. This has meant negative price inflation in some sectors, obliging retailers to sell more items just to stand still let alone grow. This cannot be sustained ad infinitum, particularly as increasing sales volume further is becoming much more difficult.

Customers in 2008 will be looking for more to inspire them to spend more. This means adding more value; better quality, better functionality, greater relevance, fashion, styling etc.

When used purely as a reactionary tactic, under current market conditions, sales and promotions run the risk of failing to achieve the intended result and should be scrutinised more closely than ever before.

Reversion back to a more ‘traditional’ model of using sales for stock clearance purposes would provide greater solace, but this might require a significant change of mindset, both on the part of retailer and consumer.

A more scientific approach to pricing strategy is called for, which optimises demand against price throughout the product life cycle.

Retailers which focus on their value proposition and use sales and discounts/promotions as a planned, strategic tool are most likely to be more successful.

Retailers should make efforts to add value to drive sales rather than reduce prices.

I've checked for the notification that this comes from The Department of the Bleedin' Obvious but cannot actually find it.

I wait with breathless anticipation to see what new retail strategies emerge!