Surge in sales 'helped by price restraint'

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The Independent Online
SHOPPERS are more price-conscious today than they were in the recession of the early 1980s, according to research by Greenwell Montagu which warns retailers to 'abandon price restraint at their peril'.

Greenwell's Ian Shepherdson points out that the strong rise in retail sales this year - 3 per cent in the first half, compared with 1.8 per cent for non-oil gross domestic product - looks surprising for this stage of the recovery. But he believes that retailers have encouraged this spurt by holding their prices under control.

'Price restraint also explains the widely differing fortunes within retailing,' he said. 'Sectors where price increases have been held down have seen faster growth in sales volumes and values.'

Mr Shepherdson believes that the increase in price sensitivity among consumers is due partly to the severity of the recession, which has caused 'profound changes in consumer psychology'. But he adds that, unlike the 1980s when inflation was rising, stable inflation means that customers are more aware of what products cost and so notice price rises more.

Retailers in the 1990s are also unlikely to be bailed out by the borrowing boom which characterised the 1980s and allowed customers to avoid immediate price rises.

He warns that the greater price- consciousness, coupled with the growth in the number of superstores and the imminent arrival of US-style discount clubs, means that competition in the retail market will intensify. That was underlined last week by Sainsbury's decision to cut the price of 300 basic products.

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