Discount fever marks shift in shopping habits: Retailers who prospered in the free-spending Eighties are having to adopt new tactics. Roger Tredre reports

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The Independent Online
DISCOUNT fever is sweeping through the high street. Everyone loves a bargain, and no more so than during a recession when every penny counts.

But retailers are beginning to wonder whether the recession is the only reason for bargain fever. The talk is of a long-term shift in consumer spending patterns.

According to many, the spend, spend, spend days of the Eighties are gone forever. The consumers of the Nineties have more in common with the consumers of earlier decades who preferred shops that piled it high and sold it cheap.

This shift is particularly pronounced in the fashion retail sector. Sir Ralph Halpern, former chief executive of the Burton Group, said: 'The business of retailing fashion will polarise in two directions, between ingenious retailers who will provide something to capture the imagination, and, at the other end of the scale, those who will capture market share by cutting prices.' Sir Ralph and a growing number of retailers are convinced that discounting will outlast the recession. The prediction is that British retailing will follow the example of the US, where budget chains such as K-Mart and Wal- Mart have prospered at the expense of Sears, Roebuck and other long-established retailers. More than 50 per cent of clothing sales in the US are discounted.

The view that discount fever will outlast the recession is not universally shared. Roy Hollis, commercial director of the TMS Partnership, a market research company, said: 'I have no evidence to suggest that once the recession has cleared, discounting will not return to traditional levels. Retailers simply can't afford to go on discounting; they have got to meet margins.'

However, a flurry of price-cutting initiatives in recent months suggests otherwise. Marks & Spencer has cut prices for autumn on many of its products. The move has sent a shiver through the high street. The chief executive of a high street rival said: 'I've told my buyers not to panic, but whatever Marks does has an impact. They are that big.'

When Marks & Spencer decides to cut the price of a pair of jeans from pounds 22.50 to pounds 19.50, the repercussions are felt at every level of the market. Other stores have to rethink their jeans prices, and are forced into pressurising their suppliers to cut their prices.

The price cuts affect clothing and some food ranges. Sir Richard Greenbury, chief executive, played down talk of a price war. In M & S parlance, the company was 'significantly improving values across all major ranges'.

The M & S move has been matched in the high street. Littlewoods has also cut prices for autumn.

The trend is the same elsewhere. The Gap stores in the US have cut the price of their jeans from dollars 38 ( pounds 22) to dollars 28. Benetton is knocking 10 to 15 per cent off the price of all its products world- wide from next January.

For many US multiple store groups, discounting is a central part of their strategy. The year- round sale, derided by a generation of retailers, is a reality.

A handful of names are holding out against the discounting tidal wave. David Jones, chief executive of Next, said: 'We restrict our sales to two weeks in most of our shops. Non-stop sales have a long-term detrimental effect on your image.' Other shops try to soften the effect on their image of permanent discounting by renaming sales 'mid-season bargains' or 'early-season reductions'. It was never meant to be like this. In the Eighties, discounting was considered an insignificant sector of the retail market. A profusion of new retail chains, led most notably by Next, moved upmarket. They serviced a new breed of consumer, said to be sophisticated and brand-conscious.

But when the recession arrived, the discounters made a comeback. Multiple store groups extended their sales periods and reluctantly accepted cuts in profit margins.

Discount fever is equally strong in the food sector. Kwik Save, with 750 stores, wants to open another 50 within the next three years. The company is running an aggressive advertising campaign promoting itself as 'the shopper's champion'.

Foreign competitors are moving into the UK. Aldi, a German food discounter, is convinced there is huge potential for growth in the discount food market. In Germany, discounters account for 22 per cent of the market, compared with 4 per cent in Britain.

Netto, a Danish discounter, has 31 British stores, and wants to open another 50 in the Midlands and the North.

Last year, Gateway launched Food Giant, a discount supermarket chain with a design format that paid homage to the Fifties. The chain claims customers can save 10 to 15 per cent on their grocery bills.

A more disturbing vision for British retailers is the spectre of American warehouse clubs and factory outlet centres moving across the Atlantic. Customers pay a token annual fee to join the clubs, which sell everything from Calvin Klein underpants to cars at heavy discounts.

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