Common pricing practices such as the bogof could face a regulatory slapdown as the Office of Fair Trading examines deals, says Elinor Zuke
Are we about to wave bye-bye to the bogof? We could be if the OFT has its way.
Last week, it published a draft report outlining in detail why it is investigating seven pricing practices, among them the bogof.
If it does take the view such practices mislead consumers and a final report is due out by October UK retailers will be hit by a ban that totally changes the pricing landscape and could land those that flout the new regulations in court. But how likely is the OFT to take such a draconian line?
All the pricing practices in the firing line are common in the UK but not all of them are common in UK grocery and the OFT is expected to come down hardest on practices such as drip pricing, which are not prevalent (see right).
However, it is also eyeing the widespread practice of deals that compare promotional prices with "arbitrary" rsps, suggesting these will come under fire. If retailers are allowed to continue offering comparative deals, the OFT is likely to want to see more meaningful rsps, predicts Edwin Mutton, head of compliance at the Institute of Promotional Marketing.
"They need to come out as to what a 'recommended price' actually is," he says. "It really must mean something and not just be a figure plucked out of the air."
"Price baiting" advertising, say, "up to 75% off" when only a limited number of goods are available at this discount is also set to come under scrutiny. "Where a few items are available at the advertised price or discount, these statements may technically be true but may nevertheless mislead consumers," reasons the OFT. But the one that will really have grocery retailers worrying is the bogof, which could also be for the chop at least as far as the word goes.
This would bring the UK into line with Europe, where use of the word "free" is banned if any exchange of money is involved. Some commentators believe this would be no bad thing. "There is a huge issue for retailers on whether you can use buy-one-get-one-free because you don't get one free you've got to buy two and pay for one," says Mutton. "In Germany they don't allow the term 'free' if you have to pay for anything."
Another aspect of the bogof the OFT may take a dim view of is the practice of raising the price of the paid-for item in a bogof, he says. "Fairly often people inflate the price of one so you're really getting two for the price of one and a half."
Central to the OFT probe is the effect of such pricing practices on consumer behaviour. If the "average consumer" is shown to change their behaviour because of misleading information or deceptive presentation, retailers will face the full weight of the OFT.
But "Mr Average" is a fuzzy concept, warns Morten Hviid, professor of competition law at the University of East Anglia. Only 40% of consumers act on price promotions, he says. "If the wealthier 60% can't be bothered to check, Mr Average may be harmed, but should we care?"
Whether the OFT can effectively police such practices is another question, he adds. IPM head of insight Colin Harper is not convinced there's any need to.
"Many practices are used properly by companies who offer a very good deal," he says. "Those channels offering poor value and delivering disappointment are already losing out in the cynicism they are breeding in their shoppers, and in the loyalty that is draining away."n
Colin Harper is speaking on Compliance: how to ensure retailers comply with your investment at The Grocer's Trade Promotion Conference on 6 July in London. Call 01293 910279 or visit www.thegrocer.co.uk/tradepromotion.
The five worst deals
The five worst pricing practices, according to London Economics:
1. Drip pricing
Prevalent in the travel industry, this is the practice of upping an advertised price with supplementary, "hidden" costs
2. Time-limited offers
Deals falsely claiming they'll only be available for a limited period
3. Baiting
The practice of offering, say, "up to 75% off" when in fact no or a very small number of goods are available at the advertised price
4. Sales
Deals that suggest there has been a reduction eg 'was £X is now £Y', which discourage shopping around
5. Complex pricing
While not necessarily representing a bad deal, offers such as "3 for 2s", which require "computations", can cause problems, says the OFT
Are we about to wave bye-bye to the bogof? We could be if the OFT has its way.
Last week, it published a draft report outlining in detail why it is investigating seven pricing practices, among them the bogof.
If it does take the view such practices mislead consumers and a final report is due out by October UK retailers will be hit by a ban that totally changes the pricing landscape and could land those that flout the new regulations in court. But how likely is the OFT to take such a draconian line?
All the pricing practices in the firing line are common in the UK but not all of them are common in UK grocery and the OFT is expected to come down hardest on practices such as drip pricing, which are not prevalent (see right).
However, it is also eyeing the widespread practice of deals that compare promotional prices with "arbitrary" rsps, suggesting these will come under fire. If retailers are allowed to continue offering comparative deals, the OFT is likely to want to see more meaningful rsps, predicts Edwin Mutton, head of compliance at the Institute of Promotional Marketing.
"They need to come out as to what a 'recommended price' actually is," he says. "It really must mean something and not just be a figure plucked out of the air."
"Price baiting" advertising, say, "up to 75% off" when only a limited number of goods are available at this discount is also set to come under scrutiny. "Where a few items are available at the advertised price or discount, these statements may technically be true but may nevertheless mislead consumers," reasons the OFT. But the one that will really have grocery retailers worrying is the bogof, which could also be for the chop at least as far as the word goes.
This would bring the UK into line with Europe, where use of the word "free" is banned if any exchange of money is involved. Some commentators believe this would be no bad thing. "There is a huge issue for retailers on whether you can use buy-one-get-one-free because you don't get one free you've got to buy two and pay for one," says Mutton. "In Germany they don't allow the term 'free' if you have to pay for anything."
Another aspect of the bogof the OFT may take a dim view of is the practice of raising the price of the paid-for item in a bogof, he says. "Fairly often people inflate the price of one so you're really getting two for the price of one and a half."
Central to the OFT probe is the effect of such pricing practices on consumer behaviour. If the "average consumer" is shown to change their behaviour because of misleading information or deceptive presentation, retailers will face the full weight of the OFT.
But "Mr Average" is a fuzzy concept, warns Morten Hviid, professor of competition law at the University of East Anglia. Only 40% of consumers act on price promotions, he says. "If the wealthier 60% can't be bothered to check, Mr Average may be harmed, but should we care?"
Whether the OFT can effectively police such practices is another question, he adds. IPM head of insight Colin Harper is not convinced there's any need to.
"Many practices are used properly by companies who offer a very good deal," he says. "Those channels offering poor value and delivering disappointment are already losing out in the cynicism they are breeding in their shoppers, and in the loyalty that is draining away."n
Colin Harper is speaking on Compliance: how to ensure retailers comply with your investment at The Grocer's Trade Promotion Conference on 6 July in London. Call 01293 910279 or visit www.thegrocer.co.uk/tradepromotion.
The five worst deals
The five worst pricing practices, according to London Economics:
1. Drip pricing
Prevalent in the travel industry, this is the practice of upping an advertised price with supplementary, "hidden" costs
2. Time-limited offers
Deals falsely claiming they'll only be available for a limited period
3. Baiting
The practice of offering, say, "up to 75% off" when in fact no or a very small number of goods are available at the advertised price
4. Sales
Deals that suggest there has been a reduction eg 'was £X is now £Y', which discourage shopping around
5. Complex pricing
While not necessarily representing a bad deal, offers such as "3 for 2s", which require "computations", can cause problems, says the OFT
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