Consumer Watch: High side to low discounts

By Susan Edmunds

Retailers inflate prices to give bigger discounts

Briscoes Group managing director Rod Duke says the full price of items is kept in line with other retailers. Photo / NZPA
Briscoes Group managing director Rod Duke says the full price of items is kept in line with other retailers. Photo / NZPA

New Zealanders who do not have time to shop around are being left out of pocket by retailers' discounting strategies, experts say.

Kiwi shoppers are among the most price-sensitive in the world. Massey University Associate Professor Valentyna Melnyk said retailers had responded to the demand for bargains by adopting a pricing strategy known as "high/low pricing", where full prices are set higher, to allow heavier discounting.

"Countdown and New World have higher prices than Pak'n Save but then they have (one-off) promotions that are cheaper than Pak'n Save," Melnyk said. That was good for consumers who had time to shop around but everyday low pricing, as seen in British retailers such as Aldi, would provide a better deal for families.

Darryl Evans, of the Mangere Budgeting Service, said most working families did not have time to shop around for groceries. Supermarket prices were higher than they needed to be and many of his clients had switched to Asian supermarkets. "They are so much cheaper than the supermarkets because there is more competition there," Evans said.

Melnyk's colleague, Harald van Heerde, said it was not just supermarkets using the tactic. He said some retailers, such as Farmers and Briscoes, had sales so regularly that a recommended retail price was not something that customers would usually ever pay. "Briscoes and many other retailers follow the strategy of really high regular prices so the discount looks really low."

A Herald on Sunday survey of Briscoes products over the past few weeks showed that discounted prices were cheap compared with competitors, but the original ticket price was often among the highest on offer.

A Kenwood food processor was listed at $239.99, with 40 per cent off at the weekend. Noel Leeming had a full price of $199.99. A Sunbeam coffee machine was $1099.99 with 30 per cent off, and Noel Leeming had a newer model for $879.99, which was 20 per cent off the full ticket price. A Sharp compact microwave was $167.99, plus 30 per cent off at Briscoes but Harvey Norman was selling the same model for $85. Betta Electrical had one for $109.99.

Briscoes Group managing director Rod Duke said the full price of items was kept in line with other retailers because many stocked exactly the same product. "You can't have a price 20 per cent higher, then take 20 per cent off and expect customers to flood in. They are not dumb."

He said heavy discounting could make it harder to get full prices for products but sometimes customers needed to replace something urgently and would pay what they had to.

Van Heerde said discounting had been shown to be 20 times more effective in getting customers into sales than advertising alone.

"Consumers want to be misled. They like the idea of being a sharp shopper, getting a 40 per cent discount. But if you think about it, it would be as economical to always have 20 per cent lower prices."

A Commerce Commission spokeswoman said specials were misleading if a retailer never charged the "usual" price, or it was artificially inflated. A supermarket chain was given a warning when it said customers could save 20 per cent off the regular price of beer when the beer had been offered at a discounted price for 32 weeks.

She said the commission did not have any concerns about Briscoes' strategy.

- Herald on Sunday

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