02/11/2011 - 10:46

Price cutting diminishes service quality

02/11/2011 - 10:46


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Price cutting diminishes service quality

WHEN the water-cooler talk turns to shopping, there are two big topics that no-one ever seems to tire of – online bargains and bad service.

Everyone seems to have their own service horror story, even in this depressed retail market where retailers are desperate to maintain sales.

And if service is still one of the simplest and cheapest ways a retailer can differentiate itself, why do so many outlets abandon their marketing and sales strategies in favour of cutting prices?

The answer, according to Marketforce Retail general manager Craig Billings, is simple; slashing prices is easy, even if it can do long-term damage to your brand.

Mr Billings regularly undertakes phantom shopping sorties to test the service quality in different retail sectors.

On his most recent trip to the Osborne Park homewares  precinct he was amazed to see how price-focused retailers were.

“Most of the salespeople took me immediately to the price point I had suggested without trying to sell me up and then they couldn’t wait to discount the product,” Mr Billings said.

“Of the 10 stores I went into only one store gave me a piece of paper with the salesman’s name, mobile phone number and quote … and within 48 hours of my visit not one store followed up with me.”

Mr Billings said simple tactics such as engaging the customer in conversation seemed to have got lost in the panic to close the deal.

“A lot of sales people just don’t know how to communicate,” Mr Billings told WA Business News.

Anxiety over the global economic outlook is causing many consumers to delay major purchases, and with aggressive discounting now standard practice shoppers are happy to sit on the sidelines and wait for prices to fall.

It’s understood discounting of key electrical products like televisions and audio-visual equipment has resulted in price erosion of more than 30 per cent in the past 18 months.

“What the consumer is saying is ‘I might wait because that is going to be cheaper next week’,” Mr Billings said.

“With that happening retailers forget about everything else and they just focus on how cheaply they can buy a product and how cheaply they can sell it and that then destroys the whole fabric of retail.

“They forget promotion, they forget their service and the sales people aren’t developed.”

Retravision is one of WA’s best-known brands and, along with the rest of the state’s electrical retailers, the group is grappling with the impact of the discretionary spending downturn.

Chief executive Paul Holt said service was a key differentiator in a tough market, but the strong Australian dollar and the burgeoning online retail market was making the sales people’s jobs more difficult.

“The value of the Australian dollar particularly against the US dollar has seen a massive escalation of online purchasing particularly in smaller item areas like cameras,” he said.

“A huge proportion of consumers today will do a lot of research online with regard to products, features and benefits and can get access to pricing around the globe.

“Armed to the teeth, they don’t really need to speak to anyone with regard to features and benefits, they just want the best price and if you can’t match it they’ll buy elsewhere.”

Mr Holt said this shift in the knowledge paradigm made it even more vital that sales staff understood the benefits of additional products and services like cabling, software and extended warranties.

This week’s interest rate cut could provide a modicum of relief for the sector but Mr Holt said he believed consumers needed to see a significant stabilisation of the global economy before they would start spending again.



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