Addicted to discounts

One of the most noticeable trends since the global financial downturn has been the growth of discounting. Retailers, desperate for sales, have been cutting prices. At the same time, there is every sign that consumers are now addicted to discounts or at least to getting a better deal wherever they can.

Market research company TNS has predicted that retailers will take years to recover. Its' study found that 65 per cent of Australians believe that retailers constantly have sales going on right now. So two out of three shoppers are expecting a discount.

TNS director of retail and shopper research Chris Kirby says that consumers are no longer willing to accept the first price they find because they know there’s a good chance they will find it cheaper somewhere else.And that's where the problem begins. If you're expecting a discount all the time, what's a bargain?

Consumers are now addicted to discounts. Everyone is looking for a deal.

"In essence the industry is training us to become professional, if not predatory, consumers," Kirby says.

It’s affected retailers badly. As reported here, the latest Commonwealth Bank Business Sales Indicator reveals that sales are sluggish and that sales of automobiles were down 1.5 per cent. Mail and telephone order providers were down 1.3 per cent and retail stores were down 1.2 per cent. Five out of the eight states recorded falls in sales. The weakest spending was in Western Australia which was down 0.7 per cent, followed by Victoria with sales down 0.4 per cent. Queensland recorded the highest annual fall of 5.4 per cent, with the tourism industry still suffering.

American clothing chain Gap has just opened its first stores here, where jeans will be selling for about $100 but has said it won’t get into any discounting war with its rivals. Let’s see how long they can keep that up. The price pressures are real, consumers have been trained to expect discounts and its competitors will be doing everything they can to put it out of business.

I have previously done blog entries, like the one here, on the trend of new consumer frugality, which emerged in the global financial downturn. The addiction to discounts is part of that story.

Discount addiction is not only affecting retailers. A report by Access Economics, noted here, says it’s also slowing down economic growth.

“Family finances remain stretched, and frugal is the new black for consumers," the report states. "Consumers are remaining cautious now that Canberra's cheques have dried up, the housing recovery is coming slower than expected, and so too is the return to strength in the pace of business spending."

It also explains why discount retail outlet the Reject Shop has been growing strongly and posted a a 23 per cent rise in its full year net profit. Fugal shoppers are flocking there, looking for discounts. As reported in the Mozo newsletter, Reject Shop managing director Chris Bryce says the focus on discounts has been good for that business.

"I think people were generally careful with their money last year and how that progresses over the next six-12 months depends on the confidence they have," he said. "At the moment, they are more frugal about spending (money on goods) they don't 100 per cent need."

According to the newsletter, discount addicted shoppers are now comparing debit cards in search of the best deals. They are now able to buy from up to 300,000 international stores that were previously inaccessible following the launch of the shopping site by PayPal.

Are you addicted to discounts? Are you always looking out for a good deal? Have your shopping habits changed over the last two years? Are you more frugal now? Or have you always looked out for discounts? Is frugal the new black? How would you define a bargain these days?