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Grocery Promos Come Under Attack in the U.K.

December 4, 2012

Eight grocers in the U.K. have agreed to follow new guidelines over promotions after complaints about the veracity of special offers.

The agreement followed an investigation by the Office of Fair Trading (OFT) that analyzed how prices are advertised and promoted in grocers. The guidelines particularly address how prices may be artificially inflated to make later discounts look more attractive. It is a voluntary code and not legally binding.

The new guidelines cover:

  1. Artificially inflated promotions: Prices should not be "artificially manipulated" to make future planned discounts more attractive. This covers 'yo-yo pricing,' or the practice of selling a product in a limited number of stores at a high price with low prominence and low sales expectations and then rolling the product out across stores at a lower price and with an advertised discount. A product also can't be priced high in its offseason only to be promoted throughout its primary selling season.
  2. Lengthy promotions: Covers when a price has been marketed as a discount price for longer than the period of time for which the selling price was initially charged.
  3. Reference prices: When referring to a past price in a promotion ('Was $3, Now $2' or '50 Percent Off'), previous prices must be fewer than two months old. Also covers when a promotion refers to a lower price when a package size has been reduced.
  4. Pre-printed value claims on packs: When a store markets "best/better value" claims, there should exist no cheaper way of buying the same volume in the same store. This includes when smaller packs are being promoted.

The regulatory agency did not discover any illegality during its investigation, but did find some "inconsistency" in the way the law was interpreted and applied.

"Household budgets across the country are under pressure and shoppers should be able to trust that special offers and promotions really are bargains," said Clive Maxwell, the chief executive of the OFT, in a statement.

A investigation by watchdog group, Which?, in May found in some cases discount prices ran for much longer than the original prices, drawing extensive media attention in the U.K. press and admissions by some supermarkets to isolated errors.

The retailers agreeing to the new guidelines were Tesco, Sainsbury's, Morrisons, Waitrose, Marks and Spencer, Aldi, the Co-op and Lidl. Nearly all issued statements offering support for more transparency in pricing.

Walmart's Asda was the lone major grocery chain not agreeing to the guidelines. A company spokesperson told The Telegraph that Asda was "taking some time to consider the recommendations in detail."

FINANCIALS:     [NYSE:WMT] [ ]

Discussion Questions:

How widespread are misleading promotional practices in the U.S. grocery channel? How would you rate the level of price transparency in grocers' promotions in the U.S.?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

How would you rate the level of price transparency in grocers' promotions in the U.S.?

Comments:

"Misleading" is such a harsh word. Sounds to me like simple standard promotional practices. If we have too much regulation on price transparency, many grocers would lose their only edge on Walmart and Aldi. As grocers, our primary objective is to separate as much cash from the consumer as possible by any legal means. Making some of our practices illegal would hurt our profits, and therefore is wrong. Infomercials do this all the time, claiming their product was $50, but because they are so kind, they will offer it for $9.95 and a zillion dollars for shipping.

David Livingston, Principal, DJL Research

Holy smokes, more rules for us to follow! The consumer already has it pretty good in the USA, and there are certain practices played by retailers today which should be scrutinized. BOGOs are the worst form of misleading ads IMHO, as the regular price goes up to make up for the free one, which is misleading, but other than that let the buyer choose what they feel is a good deal.

Selling below cost is very common in our industry, and can create monopolies for the very big stores, which is tough to deal with, BUT I'd rather fight the fight without some stupid rules that restrict my ability to be different.

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Tony Orlando, Owner, Tony O's Supermarket & Catering

Good for UK regulators. There needs to be transparency in grocery promotions. With so many ways to promote one's stores, why stoop to deceive consumers?

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Max Goldberg, President, Max Goldberg & Associates

Promotional practices in the grocery channel are as misleading as the lofty political claims initiating from all side in Washington.

The lack of true price transparency practices are also institutionalized in other retail channels. Examples are endless and they have been woven into the fabric of American commercialism and our society. Cloudy retail practices are paralleled in most other areas of American daily life from Wall Street to Non Profits, from "Fair Share" claims to "Entitlement" practices. "We know what we are, but know not what we may be."

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Gene Hoffman, President/CEO, Corporate Strategies International

First and foremost, I think the retailers in the UK that are signing up for these rules and regs voluntarily are smart to do so, as it sends out a strong consumerism signal to their shoppers.

In the U.S., on a scale of 10 being manipulative and misleading and 1 being forthright and transparent, I would give a rating of 6 to our promotional environment. But as with any average, I would not indict all retailers, as those that have earned the trust of their regular shoppers have done so without "smoke and mirrors." In addition, the shopper is keeping other retailers honest. To that end, the "price savvy" consumer now has many tools at their disposal to discern good deals from those that are not.

Despite this new consumer-empowered environment, I still believe that many of the drastic "percent off" sales in the apparel channel are suspect, and in the supermarket channel BOGOs and BUY X and GET Y promotions, often require a quick run on the hand calculator before passing the sniff test for value.

In my view, retailers who still play games like driving prices up weeks before reducing them to show large savings, are risking both their brand image and their price credibility at a time when the consumer is in position to make increasingly intelligent judgements about the veracity of promotions.

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Mark Heckman, Principal, Mark Heckman Consulting

Pardon the trite reference—but this strikes me as a tempest in a teapot. Consumers were and will continue to get prices that reflect what retailers believe optimizes volume and margin. They will compare absolute prices across retailers and online at will with mobile devices and other means. How retailers describe those prices relative to past pricing is largely irrelevant these days to all but the most gullible.

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Ben Ball, Senior Vice President, Dechert-Hampe

The key point is none of the retailers investigated were found to have done anything illegal. I don't believe any of us would support any retailer breaking the law in its promotion of products.

The retailers were reported to have interpreted and applied the law differently. If the laws regulate this area too tightly retailers will lose the ability to effectively differentiate their marketing from someone else's, and we will have an environment where everyone promotes the same items at the same prices in the same way.

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Steve Montgomery, President, b2b Solutions, LLC

Misdirection is almost inherent to the idea of promotion. Max is right—transparency isn't just the best policy, it's the only policy.

That great observer of American commerce Aretha Franklin once tunefully inquired, "Who's Zoomin' Who?"

Customers are a lot smarter than retailers give them credit for—they know how to see behind the smoke and mirrors of promotion.

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Ryan Mathews, Founder, ceo, Black Monk Consulting

I love what they're doing in the U.K., and the fact that the grocers agreed to it shows a level of sophistication not present here in the Capital of Capitalism. Can you imagine a government agency stepping in to control Walmart in the U.S.??? Unfathomable.

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Lee Peterson, EVP Creative Services, WD Partners

"It is a voluntary code and not legally binding." And so ends that effort...fortunately fraud and deception are unknown in the U.S. because ours is a market economy and everyone communicates such practices by social media—or rather they would if such actually occurred—instantly shaming the sellers into behaving. (Hiccup) now I'll just put down the eggnog and get back to work.

'notcom'

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