Shop Talk: Discounting is not the solution

Entering the New Year typically brings a sense of anticipation for those of us who live in Dubai, because we know that soon enough the Dubai Shopping Festival will be upon us.

As long as we can exchange some of those unwanted festive gifts we should be able to splurge some cash in the ensuing sales, which in turn lifts the mood, and releases us from any potential onset of SARS.

However just to focus on something a little less whimsical for a moment, the sales and festival for this year may well be a little different from those that we have experienced previously.

The world is a different place than it was 6-8 months ago and as a result, retailers or certainly the more savvy ones are a little less optimistic about what the future holds for them, and rightly so.

What the shopping festival signifies this year is a tide mark, a point of change, and maybe the opportunity for retailers to really focus their business. During the past few years of excess and unheralded spending, retailers have generally sat back and made merry.

Stock typically flew off the shelves. However, as consumers become much more aware of how much they are spending and what they are spending on, then the retailers have an opportunity to slim-line their business and focus on delivering quality product that is true to their original business and operational plan.

Before they can do this however the retailers have got to shift the stock that they currently have, and to do this they are about to go into sale overdrive. This is great news for us however, as the consumers can effectively carry on spending, but at lower prices.

The problem that this creates, however, is that with our renewed enthusiasm for lower price points and discounted goods, we consumers now don't want the prices to go back up. Given that our eagerness to shop will wane once they do, then the retailers also don't want this, which leads us towards a rather ugly spiral of only long term retailer discounts.

This effect of over-promotion, although it leads to greater sales in the short term, essentially erodes consumer confidence in normal retailers who attempt to use this as a long term strategy.

Lastly what this over promotion does is essentially offer less choice to the consumers.

But the message for us now however, is to enjoy it whilst it lasts. Times like this don't come around too often.

The writer is Head of Retail Services, GRMC Advisory Services