Retail sales tactics under close watch by Consumer NZ

  • News
  • October 6, 2015
  • Elly Strang
Retail sales tactics under close watch by Consumer NZ

Two of Farmers’ products – a Philips Easy Speed Iron and the Remington Hair Dryer – remained on special the entire time.

The study also found some of the before prices advertised on sale items increased over time.

It’s common knowledge sales are great for getting feet through the shop doors.

According to research by the UK Office of Fair Trading, “was/now” pricing in-store encourages consumers to make a purchase they might not have otherwise made.

Behaviourial scientist Thijs de Valk says discounts work on the principle of urgency, as they are only available for a certain amount of time.

This makes people believe that if they don’t buy a product while it’s on sale, they may out on a great deal.

In New Zealand, the Commerce Commission advises that products should be sold at the “was” price for a reasonable amount of time before going on special, but what’s reasonable is up for debate.

Sales are also only supposed to be for a limited time, with clear start and end dates specified.

Farmers has many prominent sales each year for Farmers Clubcard holders, as well as more general sales like the Red Dot sale, while Briscoes often has sales that promote 30 to 50 percent off everything in store.

Consumer NZ is concerned customers aren’t getting the bargains that are advertised.

"If what you're actually paying is the real price, what is a sale price?" Consumer NZ CEO Sue Chetwin said to the NZ Herald.

The organisation says there’s grounds for regular price monitoring in the retail sector, given how many sales occur.

It says companies that regularly promote the same items as “specials” are likely to be misleading consumers. 

But Briscoe Group managing director Rod Duke dismissed the findings and said sales were never permanent.

Several of the products in the study were caught up in storewide discounts, he says, not individually on sale.

The ‘before’ or ‘was’ prices for sale items were based on the manufacturer’s Recommended Retail Price and benchmarked against competitors, he said.

Retailers who rely on sales to draw in customers have suffered in their profits – Kathmandu being the prime example.

A lot of customers don’t bother to buy any items from Kathmandu until it has a sale, which may explain why it is always hosting sales.

The company is now undergoing a review of its pricing structure after reporting dwindling profits in the last financial year.

 CEO Xavier Simonet says the current sales structure is complex and confuses customers.

The retailer has been warned in the past about its sales tactics.

In 2006, it copped a $28,000 fine for advertising items as “on sale” when they’d been available at the same discounted price for months prior to the sale.

Consumer NZ says it's passing along its findings to the Commerce Commission. 

 Consumer issues 2015

Meanwhile, the Commerce Commission has released its Consumer Issues paper for 2015. 

The paper documents which companies consumers have filed complaints about and what for.

Internet traders

Consumers filed more Fair Trading Act complaints about internet traders (33 percent, or 1377 complaints) over in-store traders (13 percent, or 604 complaints).

Online trading now generates about a third of the complaints made to the Commerce Commission.

Surprisingly, the majority (81 percent) of these complaints are about New Zealand online traders, not overseas ones.

The Commerce Commission said this was an unexpected finding, as purchasing from off-shore websites can potentially increase the risk to consumers.

In terms of what the online complaints were about:

  • 26 percent were related to the goods (e.g. the quality of them)
  • 24 percent were related to the price (e.g. price increases before discounts)
  • 20 percent were related to the provision of online services
  • 9 percent were for no intention to supply (e.g. product wasn't delivered).

Another concern outlined was that in January 2015, 108,000 (18 percent) of the web addresses using a New Zealand domain (e.g. .nz and .kiwi) are registered to non-New Zealand addresses in the owner's contact details.

Complaints made to the Commerce Commission about in-store traders weren't reflective of the companies' value by proportion, as electrical and electronic products are the most complained about, but only represent 4 percent of all retail sales.

An analysis of the 2014 data found just 24 traders generate 25 percent of all complaints. 

The Trader Compliance Programme is working with selected businesses to increase their compliance efforts with the law over a two-year period.

The eight traders in the Programme currently include Vodafone, Spark, Noel Leeming and Harvey Norman, which has itself in a bit of trouble following a sales botch-up on its site.

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