The price isn’t seen as right

The threat of recession and recent media exposure of “rip-off Britain” has given rise to a nation of cynical shoppers, according to a study by Research International (RI).

Consumers believe prices are rising and they are being overcharged by high-street stores and car manufacturers.

They also think adoption of the single European currency will push up prices rather than bring them down to levels found in other European Union (EU) countries.

Some 83 per cent of RI’s UK sample agreed that “UK stores are being greedy in the prices they charge customers”.

Recent media reports highlighting supermarket “rip-offs” and international retail comparisons have only helped to encourage unfavourable consumer perceptions.

Access to the Internet has also increased price transparency.

Kingfisher Group chief executive Sir Geoff Mulcahy comment-ed recently: “The Internet and the euro are making consumers increasingly aware of – and dissatisfied withÂ- the differences in price between the US and Europe, and between countries within the EU.”

Several product areas are fuelling this consumer cynicism. Unsurprisingly, given recent media coverage, car manufacturers lead the field, with more than 75 per cent of respondents believing they overcharge.

Other areas include clothing, computers and electricals, which are all subject to varying degrees of international comparison. Consumers pointed to these sectors as examples of where they were being charged “over the odds”.

In none of the sectors covered in the research, which also included food and alcohol products, did respondents feel that the best prices were available in the UK.

While consumer confidence is reported to be on the up, shoppers have learned bitter lessons from the last recession and become more demanding and value-conscious. If the price isn’t right, shoppers will go elsewhere. Nearly two-thirds of respondents said they were more price sensitive now compared with two years ago.

With price an issue for the majority of people, retailers – most visibly the price warring supermarkets Tesco, Sainsbury’s, Asda and Safeway – are using it to vie for custom and this, in turn, has created an environment of scepticism and expectation. Price wars encourage price sensitivity among consumers. And the more retailers give away, the more consumers expect.

This, in turn, makes them more sensitive to what’s on offer. More than 82 per cent of people said they were trying to make savings on their food and groceries, while 53 per cent were looking to save on household cleaners – all products that are typically bought from supermarkets.

Consumer cynicism can be partly attributed to a widespread belief – held by 80 per cent of respondents – that “there are so many sales and special offers around at the moment that it makes me think the full price must be too high”.

In fact, 92 per cent of those surveyed thought manufacturers of major brands were using the brand name to over-inflate prices.

The widespread use of in-store promotions has convinced consumers that original prices are inflated to allow for discounts.

The nuances of cynical consumers’ spending patterns are not straightforward. Separate research conducted by RI has revealed consumers are willing to increase spend per item for certain products.

In the clothing sector, for example, many consumers don’t mind paying more for an item which is likely to last longer. Price sensitive shoppers may decrease their overall spend by buying fewer products, but they will not necessarily trade down to cheaper brands.

The overall picture is one of declining consumer confidence in retailers and big brands. Whether this is based on fact or perception is not the issue. If shoppers believe they are being overcharged, it can only erode hard-won brand trust and ultimately jeopardise retailers’ ability to overcome cynicism, boost loyalty and build their business.

Iona Carter is director of retail at Research International

Factfile is edited by Lucy Killgren

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