Is the Strike-through Price the Original Price? Improvement Needed on Confusing and Misleading Supermarket Price Reductions
Price reduction offers, often presented as “discount”, “special” or “concessionary” prices, are common marketing tools of supermarkets for sales promotion. A Consumer Council’s survey of 42 selected items at 4 major supermarket chains revealed that some supermarkets had nearly 90% of the items marked with both the “strike-through price” and the actual selling price, but the former may not necessarily be the “original price” as generally perceived by consumers. The purpose of this practice is to create an impression of a price reduction purportedly for misleading consumers. Moreover, terms used by traders such as “standard price” or “recommended retail price”, have no standard definition. This is not only a potential infringement of the Trade Descriptions Ordinance but is also detrimental to consumers’ right to accurate information for making informed choices.
In a report in 2014, the Council raised the issue of unclear price labelling for sales promotions in supermarkets. The findings of the present survey show that the problem still persists without any improvements. As the price of a product will have direct influence on purchase decision, supermarkets have the responsibility to ensure the transparency of prices and that all price reduction claims and the extent of the reduction are truthful and verifiable. The enforcement authority is also urged to benchmark with overseas experience in devising clear and specific enforcement guidelines for traders to follow when making price comparisons.
The survey was conducted in 2 separate periods this year, from 1 to 30 April and from 17 June to 16 July. Onsite inspections were carried out in 16 outlets of the 4 major supermarket chains to record the daily prices of 42 relatively popular items, including food and beverages, personal care products and detergents. The online prices of the stores during the previous year were also used as reference for comparisons.
The survey showed that most supermarkets used price comparisons for sales promotion by highlighting the price disparity to create an impression of price reduction. This normally involved 2 displayed prices on the price label with the higher price being struck off with a line through it (the “strike-through price”), while the other price was the actual selling price. In 2 of the supermarket chains, nearly 90% (38 and 37 items) of the selected products had a “strike-through price”, while the other 2 chains also had nearly half of the items (23 and 20 items) similarly marked. The aim of this practice was to make consumers believe that the price of the product had been reduced from the “strike-through price” and that the lower price was a special offer.
In the enquiry on the definition of “strike-through price”, 3 supermarket chains declined to answer. Only 1 chain stated unequivocally that its “strike-through price” was the “recommended retail price” set by the supplier, but this was not disclosed on the price tag as required by the Enforcement Guidelines for the Trade Descriptions Ordinance. Another chain replied that its “strike-through price” was the “retail price”, but was subject to fluctuations in the incoming prices, market conditions and demands. The other 2 chains under the same conglomerate did not reply. Consumers should be aware that while the meaning of “strike-through price” is ambiguous, supermarkets will still highlight on the price tags the expressions like “special price”, “latest promotion” or “best buy” to emphasise the price-reduction benefit and entice consumers to purchase.
Consumers generally consider the “strike-through prices” are the “original prices” but the survey revealed that over 75% (32 items) of the reduced-price items had not been sold at their “strike-through prices” within the previous 30 days. The situation was even more serious in 2 supermarkets under the same conglomerate of which among the 38 and 37 reduced-price items, 32 items in one and 31 items in the other (over 80%) had not used the “strike-through prices” as the selling prices during the previous 30-day period while the other two supermarket chains adopted the same practice in 78% and 20% of the items.
Taking a 12-can soft drink pack as an example, 2 supermarkets adjusted the “strike-through price” from $94.8 to $99.9 but the item was never sold at either of the “strike-through prices” during the survey period with the selling price maintained at the range of $37.9 to $42.9. Another example at the same 2 supermarkets was a 6-pack of soy milk with a “strike-through price” of $28.7, the selling price remained at $18.5 throughout the survey period and even the highest online price for the same item during the previous year was only $19.9.
The examples above clearly show that “strike-through prices” are not the “original prices”, and in fact, the “strike-through prices” may even be inflated to create an impression of a big discount for promotion purpose. Moreover, the apparent difference between the “strike-through price” and the actual selling price may not accurately represent the actual savings as expected by consumers.
Even if the supermarkets did previously sell some items at the “strike-through prices”, the duration had been very brief. For instance, in 1 supermarket, 16 (80%) of the 20 reduced-price items were previously sold at the “strike-through prices” but 7 of them were sold at these prices for less than 5 days within the 30 days period.
The survey also made reference to the online prices of the 4 supermarket chains of which 3 chains had never displayed in their online shops the in-store “strike-through prices” for over half of the items surveyed (14, 20 and 21 items). However, since the online and in-store pricing policies are different, consumers should exercise due care in comparing the prices.
According to the Enforcement Guidelines for the Trade Descriptions Ordinance (TDO), when making price comparisons, traders should clearly show the definition of the “strike-through price”. If the “strike-through price” refers to the “original price”, retailers are required to sell the item at the “strike-through price” for a reasonable period of time. However, the duration of such reasonable period is not stipulated in the TDO Enforcement Guidelines. Overseas examples, for instance, UK, requires that the duration for the reduced selling price must not exceed that of the higher quoted price; and in Singapore, the higher quoted price must have been used for a minimum 28 consecutive days in the previous 6 months. The Council urges the enforcement authority to clearly define what constitutes a “reasonable period” to ensure that traders abide by the law.
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