While many of us are only starting to think about our Christmas lists, retailers and manufacturers have spent a good proportion of the year preparing for the festive shopping season. So, as the sector finally strides into its peak trading period, Stuart Farr looks at the steps businesses can take to avoid disputes that can undermine all their preparations, from the marketing and promotion campaigns, through to the sale (and return) of goods.
The actual sales promotion period consumes around 25% of the year which, by any standards, illustrates how important the festive period is for retailers. For many, strong Christmas trading can mean the difference between success and failure for that year, so it is important for retailers to understand their responsibilities at the point of sale.
Of course, retailers are now used to the changes brought about by the Consumer Rights Act 2015, which effectively came into force in October last year, introducing the 30 day rule which gives consumers the right to reject; and you will also be aware of the requirement for a trader to be given one opportunity to offer a repair or replacement. But how should you deal with the sensitive issue of an unwanted present?
There can be nothing more demoralising for a retailer than to work hard throughout the autumn/winter period pushing products out of the door and spending a fortune on comforting advertisements featuring warm fires, baubles, and a beaming youngster holding their newly treasured toy next to the Christmas tree, only to see the same product you sold in December being walked back through the door in January, duly held by a downcast parent, who explains that Little Johnny has given up Lego Star Wars and now wants to play the trombone. Oh, someone please show you mercy!
Traders will be relieved to know that provided the goods are not faulty the law does not expect you to be charitable or generous and you are perfectly entitled to refuse their request. While the big players can afford to swap unwanted items for vouchers to spend in store, it is not incumbent on you to bow to such commercial pressure. There’s a new year and a new retail season to look forward to.
Sales promotions aim to incentivise consumers to buy products, build customer loyalty and enhance brand awareness. As a marketing tool they are very powerful, but surprisingly, the “rules” which apply to many sales promotions are largely self regulating and, so far as the consumer is concerned, the mechanisms for complaint are far less well known than, say, the consumer rights referred to above. Nonetheless, for those who wish to be less than benevolent this year, scrutiny is just around the corner.
One of the most common sales promotions involves free offers; the “buy one get one free” offer being a good example. The British Code of Advertising, Sales Promotion and Direct Marketing (The CAP Code) is relevant here, and sets out several important pricing principles, which retailers should keep in mind.
In the context of free offers the CAP Code provides that marketing communications must not describe a product as “free” (or similar) if the cost of response, including the price of a product or service which must be bought in order to obtain the free item, has been increased or the quality of the product or service which must be purchased as a pre-condition has been reduced. Similarly, the retailer should not try to recover its overhead in respect of the free item through packaging, handling or administration charges. The term “free trial” must not be used to describe “satisfaction or your money back” offers or those where a non-refundable purchase is required.
The underlying principles of the CAP Code require that promotions should:
- be legal, decent, honest and truthful;
- be prepared with a sense of responsibility towards consumers and society; and
- adhere to the principles of fair competition.
Bearing these principles in mind when creating your seasonal promotions will stand you in good stead. Beware promotions which involve prizes, prize draws and instant win offers as these carry particular risks. They are open to being declared an unlawful lottery and so the wording and operation of the promotion needs to be carefully considered and managed to ensure that prosecutions are avoided.
That said, there is no legislation which specifically addresses the activity of loss-leading on the part of a trader. Provided the activity does not contravene the UK’s complex competition laws then in most cases it is an acceptable method of sales promotion.
Showrooming – the practice of examining products in-store and then buying it elsewhere (and cheaper) online – still causes retailers a lot of frustration, but generally it is all perfectly legal. Indeed, this is one aspect where the law does not intervene directly because public policy demands consumer choice.
The consequence of this sort of purchasing behaviour is obvious. Showroom samples of products can deteriorate through frequent examination. Sales representatives spend so much time fielding queries from consumers who have no intention of buying from the store, that they are prevented from engaging with “genuine” customers.
Shoppers do enjoy a good browse around a well stocked shop and for some this is a hobby in itself. Retailers try their hardest to combat the showrooming phenomenon and do so in different ways. Some offer “deals” and reduce their prices, or provide added value services which encourage return visits. An example might be free repairs or servicing of the product over a limited period of time after purchase. This allows the trader to engage with the customer and help foster longer term relationships. Price matching strategies and arranging for suppliers to provide exclusivity on certain products offered in store may also assist in encouraging customers to buy in store rather than elsewhere.
For further information about any of these issues please contact Stuart Farr. In the meantime, we wish you all a successful and prosperous festive season and look forward with enthusiasm to the challenges of trading in 2017.