The Illusion of Promotional Sale Prices

The wild goose chase has now been going on for years. Consumers have often been saddled eventually with
debt and unwanted items or been made to live
beyond their means

Once in a month, and sometimes even twice, our shops which call themselves supermarkets or hypermarkets even, publish their brochures of promotional sale prices on selected items. The public responds to such time-bound “promotions” buying up, at times in larger quantities than they would actually need, for fear that the next time they go around, the prices would have shot up.

Not only does this process accelerate consumption expenditures by the public. On occasion, it even results in waste or excess consumption for reason only that the battered consumer got into more of certain items than he had appetite for. By the same token, the trader is able to increase turnover, but also profits. On occasion, the device is also employed to dispose of unwanted items for which there really was not much demand.

Does the public gain in the process? Not if it is led to buy up more than it really needs or is pushed into buying up items that will soon become obsolete, thanks to the frenetic adverts limiting the “promotions” to a given window of time or creating fear of seeing the price go up again. This depletes the public’s disposable income.

In the case of the more durable items, such as electronic gadgets, members of the public may even get into debt, only to realize that they allowed themselves to be misguided into buying up as if in competition with other buyers likely to wipe out the available stock of the “promotional” space. This kind of wild goose chase has now been going on for years. Consumers have often been saddled eventually with debt and unwanted items or been made to live beyond their means.

The shops/suppliers of services themselves operate on a model of their own. For them, the volume of sales realized counts the most. Their objective is to catch as many customers as possible – employing the threat that the price will soon be hiked up – and thus to keep maximizing profits. In a relatively narrow market like that of Mauritius, various shopping centres use this device to go on increasing the number of “footfalls” (visitors) in their respective malls.

At the end of the day, the successive rounds of price increases coming out of this process of business turnarounds, are paid for by the public. The public works under an assumption – in a narrow market like that of Mauritius – that the sellers would be in competition with each other. To a certain extent, this is true.

In reality, what’s the general experience about price movements? They’ve kept increasing over the months of the year and over the years. This is true for comparable products of the same type, despite their differential branding. An 840ml bottle of a certain concentrated fruit juice – for example — that was selling only some time back for Rs 87 has been successively increased to Rs 168 currently. The price will drop down temporarily to Rs 128 when a wave of “promotion” is launched to prevent consumers shifting permanently to other cheaper brands, more or less identically priced. This process ensures a continuous eating away of the public’s purchasing power. Those most affected by this are found at the lowest rungs of the economic ladder.

Even where the rupee’s exchange rate remains steady or the value of the import currency drops – e.g., that of the South African rand – the product’s price goes on being escalated. Such is the commercial strategy adopted on a more or less uncompetitive product and service market as that of Mauritius. The periodic “promotion” price gives the impression that the public is getting a better deal as compared with the already escalated price. This is sheer illusion.

There is an even better illustration of the issue from the property market. In several past decades, the price of land and housing remained more or less steady. A newcomer on the labour market could aspire to become owner of a unit according to his/her means. It was within reach for relatively modest income earners. No longer the case.

The situation changed dramatically, once property transformed itself to become more an instrument of speculation in the hands of developers. Henceforth, the price of land and real estate has been on an ever ascending or a steeply upwardly rising curve. As in the consumer goods market, buyers of ordinary or slightly higher grades have had to get into significant debt to buy up relatively decent residences due to continuous price escalation.

Where a developer successfully assigns an upmarket tag to a property development, a prospective buyer will have to reckon with much higher expenses to become owner of a unit in such a category. This is where buyers will have to fork out from around Rs 4 million for ordinary living quarters to starting-from-Rs 12 million apiece for luxury villas.

Such prices are completely out of reach of the regular earnings of our normal professionals or of our traditional middle class, far in excess of the actual cost of production. There’s perhaps an inventory of foreign demand which makes the developers quote such high prices out of the way of the normal local earning power of even well-established professionals.

Not bad to internationalize the domestic property market, one might say, especially if it adds to our productive potential, but where are the safeguards that locals will not be pushed out to the periphery, given their more limited means and given also the continuous hike of property prices this system has been giving rise to? Will such price escalations not go ahead to frustrate the general population’s legitimate aspiration for decent housing at an affordable price? What’s the master plan?

The illusion is again created in these cases that unless one buys up the properties at those prices which usually prevail in rich country property markets, the alternative is to have to buy them up later at even higher prices. There’s a general feeling that property price escalation, helped by speculation, will someday hit a raw nerve in the population – that only the privileged few can afford to be endowed with decent living quarters.

It looks as if there is no clear finality in the cases of both the consumer market and the property market. Governments normally ensure reasonable access by certain vulnerable members of society by focussing on price controls, in the one case, and on social housing, in the other. Maybe we should also consider how those having a higher social standing or an aspiration for “something better”, the middle class in particular, should find a balance before they are hard hit by this system of perpetually rising prices.

Anil Gujadhur