Discounting rates slow as retailers look beyond promotions

The average price of non-food items fell 2 per cent in September, an improvement on August figures and suggesting that moves by retailers to de-escalate price promotions are starting to have an impact.

High Street

The British Retail Consortium says deflation slowed last month, with the figure down from a 2.3 per cent drop in August.

Overall, prices were down for the fifth consecutive month, although deflation again slowed from a 0.5 per cent drop in August to 0.2 per cent in September. Food prices were up 2.9 per cent, an improvement on August’s 2.5 per cent figure, although this failed to offset the drop in non-food items in particular audio and visual equipment and men’s and children’s clothing.

Many retailers turned to discounting during the recession in an attempt to boost sales as consumer confidence and spending slipped. However, brands such as Procter & Gamble, Unilever and Arla are now looking to move away from price promotions to see how else they can offer customers value.

Speaking at the IDG Convention on Tuesday (8 October), P&G’s UK managing director Irwin Lee vowed to improve marketing campaigns by moving away from “unsustainable” giveaways and instead highlighting innovation.

“We believe the consumer should get better value, but by a combination of benefit performance and price, not price alone,” he said.

Meanwhile clothing retailers such as Next are tying to limit how much stock they have to put into sale in order to boost revenues by buying more carefully and planning better around factors such as the weather.

Nevertheless, Nielsen’s head of retailer and business insight, Mike Watkins, believes competition for consumers’ discretionary spend is set to continue, with customers still on the lookout for the best deals.

“Promotional savings and the use of coupons continue and this is helping shoppers to budget and seek out the best deals. With consumers still uncertainty about when and where to spend, we expect competition for discretionary spend to intensify in both food and non-food retailing, as we head towards the end of the year,” he said.

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