Discounting may cause some retailers to go under

Demi Mason — Fri, 26 Feb 2010 09:00:21 +0000

Heavy discounting of goods is likely to cause some retailers to go broke warned Gerry Harvey, chairman of Harvey Norman. Talking about his own furnishing and electrical outlets he said that it was a struggle to turn a profit because so many items had been knocked down in price to encourage customers to buy. He said that he knew that a number of his rivals were also finding it difficult. He made the point that if one item is discounted then other items would have to be priced so that they took up the slack. He said that even though there was a reasonable amount of customers coming into the shops price reductions meant that profits were meager. Norman said that it wasn’t difficult to do the math – if the discount on one item is not made up on the price of another item then the result is that retailers will go broke.

The accounts for many retailers show that sales have been flat since the major discounting started in the run up to Christmas. Country Road has said that partly because they have been discounting heavily they have recorded a drop in their first half profits. Myer department stores have also said that discounting caused them to have a disappointing Christmas and that even though they have continued to discount sales for the first half are up only slightly. Specialty Fashion Group the women’s apparel retailer said that heavy discounting was having a major effect on the books of retailers in the sector.

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Discounting may cause some retailers to go under