DTI’s drive to cut prices will fail, say electrical retailers

The Department of Trade and Industry’s attempt to push down prices on electrical goods by forcing manufacturers to supply discount retailers will leave the market largely unaffected, according to independent experts.

Specialist retail analyst Verdict Research argues that retail margins on electrical consumer goods, typically between three and seven per cent, are too tight to be squeezed further.

This is the same view held by large retailers such as Dixons and Comet.

However, campaigners claim prices will drop by as much as 25 per cent when the DTI’s order, which makes it illegal for manufacturers to refuse to sell to discount retailers, comes into force on September 1.

Verdict retail analyst Clive Vaughan says: “The only thing that would bring down prices is if worldwide manufacturers like JVC and Sony decide to take smaller margins from their products and pass that on to retailers. I don’t see why they would do that.”

In a report out this week, Verdict predicts that grocery chains like Tesco will sell the heavily discounted goods. They will sell a limited range of products like TVs and video recorders as loss leaders simply to get people into their stores.

The research body also claims that specialist retailers, like Costco, will have to stick to their existing pricing strategies of selling discounted goods on a limited range of top selling products because manufacturers will refuse to drop their margins.

However, the Consumers Association disagrees. Mark Purdy, senior policy researcher says: “Discount retailers have lower overheads and offer lower levels of after sales service, which means that they can cut prices.”

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