IN-STORE MARKETING: Shop Talk - How Wal-Mart has led to irrevocable change here

British retailing was once typically "service" oriented. Now there are unmistakable signs that it has slipped sideways into "price orientation".

Prior to Wal-Mart's purchase of Asda, the UK was world leader in quality of service and own label. Foreign retailers used to visit these shores to research the classical examples of service retailing, then copy them back home. But the incursion of Wal-Mart into the UK changed retailing here irrevocably.

Evidence for this comes in the remarkably low Retail Price Index, which for the past couple of years has not risen above 3.5 per cent a year.

There are many factors behind this, but a key element is the sheer competitiveness in retailing.

A number of sectors have even seen price deflation, with TVs and hi-fi equipment, for example, 35 per cent cheaper than three years ago.

Alongside the Wal-Mart incursion has been the rise of discount retailers.

Whether it's New Look or Ryanair, consumers can now find a discount alternative in most sectors. In a period of fragile sales levels, the discount sector has forced established retailers to review prices.

But the top end of the market is still secure. The John Lewis Partnership, that excellent barometer of the upper end, reported a six per cent increase in profits for the year that ended in January, indicating that the trend is not so much of a downward spiral into the pit of perpetual price wars but an even a clearer segmentation into service versus discount. The problem is that many of our old retail stalwarts occupy a somewhat dated intermediary position. Sainsbury's is involved in yet another relaunch to maintain its position between quality Waitrose and permanent Wal-Mart/Tesco price clash.

The challenge for promotional marketing in this melee is to determine the client's agenda. Many major players have not yet come out on the discount/service issue. The ideal for many retail clients is the highest-quality product, exemplary service levels coupled with rock-bottom prices and, of course, suicidal giveaway promotions. For retailers such as these, a course in good old realism is well overdue.


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