Discount will be king of retail

From tap beer sold as "three for 6 RON plus one free" at the market to cars worth tens of thousand of euros with discounts so high that practically one can buy another car, almost nothing is selling without a discount in retail any more. With a new strong wave of purchasing power decline as a result of the overall salary and pension cuts affecting almost 8 million people, i.e. the 2 million employees of the public sector and state-owned companies and the 6 million pensioners, retailers will have to resort to brutal discounts to be able to survive in 2010.

Gunter Grieb, chief executive of discount store chain Profi, the annual business of which stands at 140 million euros, says trade chains are those artificially amplifying the promotional offer phenomenon.

"Consumers demand lower prices, indeed, but it is retailers that push the issue with very aggressive promotional offers for the products in their catalogues, so that the regular price is no longer attractive compared to that of the sale. I believe such desperate actions of big store chains are not taking the market in the right direction, because price cuts for products part of special offers translate into higher mark-ups for the products in lower demand on the market. The right thing to do would be for all retailers to come up with good prices for the entire range of products," Grieb says.

Another retail manager confirms the onset of the promotional offer war: "Had we had these promotional prices in 2008, people would have rushed to the stores, but now we can feel the purchasing power is lower. Discounts have a weak impact on durables, for instance, because people are no longer taking out loans," said the manager who wished to remain anonymous.