The Office of Fair Trading (OFT) has moved to curb misleading promotions with a new set of principles today. Retail Week takes a look at the implications.
The OFT’s decision to formally move to stamp out misleading promotions serves as both a predictable end to a long-running issue and a sad indictment of an underhand practice.
Under the principles, eight supermarkets – namely Tesco, Sainsbury’s, Morrisons, Waitrose, The Co-operative, Lidl, Aldi and Marks & Spencer – have agreed to a raft of guidelines. These include: only to sell products at a discount for the same or less time than the product was first sold at the initial price; prices should not be inflated to make discounts more attractive; on-pack value claims such as ‘Bigger Pack, Better Value’, should ensure that there is no cheaper way of buying the same volume of the product elsewhere in the same store. It is understood Asda, which operates an Everyday Low Price strategy, has asked for more time to consider the OFT’s guidelines.
The grocers have also agreed that when stating a previous selling price on a promotion, that price should be recent and not from several months previous.
OFT chief executive Clive Maxwell said: “Household budgets across the country are under pressure and shoppers should be able to trust that special offers and promotions really are bargains. Prices and promotions need to be fair and meaningful so shoppers can make the right decisions.”
In reality, the writing was on the wall for grocers employing these tactics. A BBC Panorama programme a year ago exposed the practice to widespread public vitriol and was followed by a Which? survey in May which analysed more than 700,000 prices and suggested that in some cases “discounts” ran for much longer than the original price. Furthermore, the proliferation of photos of misleading ‘deals’ posted on Twitter have regularly exposed the practice leaving retailers with a careful choice to be made between bad PR and sales gained from those duped into deals.
Shore Capital analyst Clive Black says: “If the supermarkets did not read the smoke signals they are blind and deaf. I do not think it’s unreasonable that consumers are aggrieved if they are falsely manipulated. It’s not acceptable and the industry should not be doing it in the first place.”
The new principles also raise a number of questions for shoppers. Firstly, do the majority of shoppers trust that a deal is a real deal? Also, do they know what the real price of products should be? With 30-40% of products on promotion in UK grocery, the average shopper could be forgiven for not knowing the price of a pack of dishwasher tablets.
Moreover, with price matching, that exclude promotions, common place across the supermarkets, deals have become key in differentiating on price. “People do know the price less than they used to,” says Black.
However, pricing is arguably more transparent than it’s ever been with services such as Mysupermarket.co.uk and there has been a move away from BOGOF deals as shoppers look to shop based on what they need in the immediate term.
The principles could prove a key step in supermarkets regaining trust with their shoppers. And with low volume growth in the market, fighting for spend through brand equity and a strong relationship with customers is vital. Whether the grocers will find a way around the new rules to continue to chase sales remains to be seen.