Not everything you see in the high street is black and white

One good thing about the economy at the moment is that it gives retailers plenty of opportunity to focus on what Christian ministers would have us believe are the true messages of Christmas.

The priests I speak to tell me this is traditionally one of the more frustrating tasks of their ministry, as they find themselves up against all the capitalist might of Mammon. This year retailers will be able to concentrate much more on the non-commercial aspects of Christmas.

One hopes they find comfort in doing so, because the materialistic sides of their lives are evidently going to be bleak. Retail consultancy Verdict added weight to predictions of recession this week with grim news that retailers will have a long tail of excess stock, amounting to 1.6bn, in the run-up to Christmas, having ordered rather more optimistically than sales figures are justifying.

Verdict expects November sales to show a 0.8 per cent rise to 16.7bn and December’s increase to amount to a little under three per cent at 20.5bn. Deloitte & Touche’s annual survey piles on the agony with news that three times as many retailers as last year are expecting a drop in turnover, with average sales expected to rise between a paltry one per cent and three per cent. Cut-price sales will come early this year – look out for them next week.

This is especially interesting in the light of the allegations of profiteering in the British retail market as continued by The Sunday Times last weekend under the campaigning headline “Rip-off Britain”. That newspaper has a long and highly respectable reputation for pursuing consumers’ best interests at the shops. I particularly applaud its past examinations of the superstores’ “price-war” claims.

Its latest contribution in this vein demonstrates that consumers can catch a train to Brussels or a ferry to Calais, can purchase over the Internet or even fly to New York and still make net savings on equivalent purchases in a British high street. Atmospheric support is supplied by computer hardware manufacturer Intel, which last week accused the Currys-to-PC World combine Dixons Stores Group of overcharging, thereby stunting the market for computers.

Similarly, the stories of groceries costing as much as 40 per cent more in British superstores than abroad are well recorded. Our retail market is, apparently, overdue for having its collar felt by the Office of Fair Trading, the Department of Trade & Industry and the European Union.

This may or may not be fair on the majority of the domestic retail market. One case for the defence, which I have stated before, has it that the mechanics of the British market are not comparable with continental markets. It may very well be that British retailers enjoy net profit margins of five to eight per cent, compared with an equivalent of two or three per cent in continental Europe, but the cashflow cycle is also entirely different.

Continental retailers sit on their cash far longer than their UK rivals. Strip out the continental interest advantage and you will discover that net margins are altogether more comparable.

That is one defence. There are also pleas in mitigation to be made, before anyone runs away with the idea that continental markets are full of highly efficient Robin Hoods. One such plea might be that foreign manufacturers have a strong vested interest in keeping prices high for their products in the UK. The most obvious examples are in the motoring industry – indeed, The Sunday Times quotes a representative of Peugeot as saying that he (and by implication other continental manufacturers) are more than happy to enjoy wider margins in the UK. There must be a trade off here between availability and price, not just a rip-off.

Furthermore, it’s a bit rich to lay into the British retail market for over-charging when the likes of Asda and Sainsbury’s have been barred from flogging designer labels such as Ralph Lauren and Adidas at a discount by the European Union. I find it hard to understand why the EU should want to protect the huge margins of designer names acquired in the so-called grey market – and harder to understand why the superstores should want to re-invent the premium-brand game. But there is a sauce for both goose and gander here – and British retailers cannot be both cost-cutting and profiteering villains.

Meanwhile, the OFT cranked into action during the summer to declare that superstore chains may be abusing their buying power with suppliers to inflate margins at the expense of their customers. This is going to be very difficult to prove. Markets shares for the big four superstore chains vary wildly between product sectors and even the Office of National Statistics abandoned its retail sector annual report last year over concerns at how sales volumes were being used to calculate the retail prices index.

Don’t get me wrong. While arguing that British retailers may not be the villains they’re portrayed as, I’m not claiming they’re angels – and public scrutiny is healthy in any market.

But just remember those Christmas market sales predictions. If British retailers are forced to cut prices wildly to shift stock, those which haven’t been profiteering to date will go to the wall. That will reduce competition. And then no doubt our consumer champions will have further cause to complain.

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