Stores cutting their own throats Customers tired of sales treadmill

price cuts have created an atmosphere of sales cynicism among shoppers

SHOPPERS for clothes have stopped trusting stores that offer an

endless stream of price cutting and have turned instead to slightly more

expensive, quality lines that they believe in, according to a report

produced yesterday.

Credibility has become a far greater issue than ever before, as

consumers shopping in stores that continuously discount lines feel they

can no longer believe the price they see before them.

As retailers have found that they must become more efficient to

survive, their policy of trying to tempt shoppers through their doors by

cutting prices has apparently backfired.

Consumers are now adopting the attitude that if the shops can afford

to slash prices, the goods were over-priced in the first place.

Retail analysts at Verdict Research are now warning that endless

price-cutting could actually harm trade in the clothing market. And they

also warn that as quality and design are cherished more by consumers,

prices may creep up.

''The proportion of goods at #19.99 are going to be higher than the

#17.99s,'' predicts Ms Hilary Monk, author of Verdict Research's report.

''Retailers are trying to move towards 'everyday low prices'. They

have realised they have to reassure consumers that every time they go

into a store, they are going to get the best possible prices, instead of

leaving the customer thinking 'If I buy this now, it will have 20% or

30% off next week','' she adds.

Clearly, the policy of continuous discounting has proved bad for

customer morale and the customer's perception of the retailer.

''The recession-hit consumer has come to distrust mainstream retailers

that discount on an ongoing basis. The most conspicuous example of this

is The Burton Group. The company's specialist chains locked themselves

into an endless stream of price-cutting that was difficult for the

business to extricate itself from. The group's fashion multiples have

seen their market share fall from 6.2% in 1992 to 5.6% today,'' said a

spokesman for Verdict Research yesterday.

The Burton Group's own report and accounts confirm that discounting

has not been a successful strategy and that plans are now in place to

adopt a more realistic pricing policy to attract more customer

confidence.

Mr Sean Eddie, a retail analyst with Natwest Securities, sees the

Burton Group as a ''classic case'' of being forced to move away from its

dependence on continuous discounting.

''The problem is weaning the customer off the sale treadmill, and just

recently the group has been showing signs of achieving that. But they

are still perceived by the consumer as offering sufficiently low quality

out of sufficiently unsatisfactory outlets. The consumer is never

compelled to pay full price and has become inured to sales scenarios,''

he said.

The success story of the retail clothing industry is, say analysts,

Marks and Spencer.

''In the autumn and winter of 1992, Marks & Spencer responded to

stagnating sales by adopting Outstanding Value, which meant sharper

initial pricing,'' said Mr Eddie.

Marks and Spencer already had a loyal consumer base and has never

resorted to slashing prices across the board. As one analyst put it:

''You would be lucky to save the price of your bus ticket at some M&S

sales.''

Ms Monk said: ''The way in which Marks and Spencer put across its

message to the customer was very subtle -- it was done so that the

consumer did not feel there was an image of Marks' discounting, but that

it had just enhanced the value that much more.''

She feels that other stores are beginning to follow its example,

putting more emphasis on quality and design. She picks out retailers

Next and River Island along with Marks & Spencer as offering distinctive

merchandise and the right balance between price and product quality.

But some other retailers, such as Oasis, Monsoon, and Hobbs are also

achieving success. Perhaps their designs are perceived as ''hot'' at

this particular time. Perhaps also there is a swing towards

better-designed and more imaginative clothing after what has been seen

as a relatively boring period in the retail clothing trade. Basic

women's items such as leggings, baggy jumpers and polo-necks are still

the premise of stores such as Marks & Spencer, whose own image for

women's and men's fashions has improved radically.

Referring to chains such as Oasis and Monsoon, Ms Monk says: ''It's

the right product and what the market wants at the moment. It's

something a little bit different and there is a bit more design input.

The prices are higher, but there is a demand for it.''

Mr Eddie says: ''There has always been in fashion an ability for niche

retailers to make money through being perceived as fashionable at that

particular time. You just have to look at Covent Garden and the trendier

parts of Glasgow to see that. But I am not sure if in general, without a

sufficiently fashionably strong product, you can get away with it.''

Etam has failed in its attempts to move its brand slightly upmarket,

providing a warning to others that the middle market in fashion remains

incredibly competitive, he says.

But if retailers face tough times, with virtually no elasticity in the

market, and, as some analysts believe, higher underlying inflation than

Government statistics indicate, the news for the consumer is good.

''Consumers are getting a better deal. Retailers in the 1990s are

focused on giving the consumer greater value, whereas in the 1980s it

was all about 'value', which essentially meant charging bigger prices in

order to enhance the feel and the style of their shops and formats.

''Nowadays, most consumers are much more discerning and

price-sensitive, and much more cynical about the extent to which new

formats are necessarily value,'' said Mr Eddie.

Labour's spokesman for consumer affairs, Mr Nigel Griffiths, predicts

that the days of bogus sales claims are now coming to an end.

''People are now thinking twice before they buy just about anything,''

said Mr Griffiths.