Edwards on ... the dangers of discounting

Early this morning I heard a radio reporter gleefully break the news that December's retail figures for a couple of big, upper-end high-street names were a couple of percentage points down on 2007.

Half an hour later the same reporter was less gleeful because sales for another, lower-end retailer had been released and were well up. So was it a good December on the high street or not?

The pundits seem to think figures will finish down on 2007, but not by much. If you take into account the unprecedented level of discounting before Christmas you have to conclude that people managed to buy more products than ever before - was there really no appetite to purchase? Did the stores really have to discount so hard, cutting dangerously deep into profits?

There's a branch of applied maths called game theory; it tries to predict the optimum move for a player when he takes on others in a competition that is ultimately determined by the other players' actions. On the high street this Christmas, it would have been better all round if no one had discounted - there was enough business to go around for most players. But given that someone was going to discount heavily, game theory says it was best to discount as well - if you didn't, you could suffer.

And now discounting is becoming the norm. Gleeful media reports of economic doom instil in the consumer the urge to move downmarket. So on the high street, initially the lower-end players do better, but the upper-end players will - slowly but surely - subtly adjust their profiles and start to satisfy a lower level of the market.

So what of horticulture's amenity market? Perhaps it's not so different from the high street: there's been a lot of discounting and the customer now wants to "get a bargain" (that is, to buy plants at unfeasibly low prices) and upper-end players are moving downmarket to win the business. However, this simply devalues what's there. Game theory says you sometimes have to take part in the silliness to survive, but it's silent about what you tell customers when they get upset that you're no longer giving them the top-level service they used to be happy to pay for.

- Tim Edwards is managing director of Boningale.


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