Discounts damaging retail says RTT

Current retail culture is unsustainable, warns KPMG/SPSL Retail Think Tank.
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Constant discounting, sales and promotions are likely to lead to an increasing number of insolvencies, the RTT believes, and a new set of strategies is needed to turn retail in the UK around.

In its latest White Paper the RTT reports the use of sales, promotions and discounting has changed from a pure clearance role to a range of more tactical and reactive purposes. It believes this is affecting shopping behaviour and potentially eroding away retailer brands and in-store experiences.

The report also says sales growth by value has slowed over recent years while sales by volume have increased, forcing retailers to sell more items. According to the report this can’t be sustained, particularly because increasing sales volume is becoming more difficult.

The RTT points out that customers this year will be looking for more to inspire them to spend more, such as adding more value, offering better quality, better functionality and more relevance.

The group also recommends that sales and promotions should be scrutinised more closely when used as a reactionary tactic, as they run the risk of failing to achieve the desired affect. However, reverting back to a more traditional mode of sales for clearing stock would require a significant change of mindset from both retailers and consumers.

Tim Denison of SPSL said: “This is traditionally the least ‘sexy’ part of the marketing mix and yet it is business critical.”

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