Richard Hemming: Is deep discounting on its way out?
On the surface, life seems generally predictable and familiar. Alarms wake us at the same time every day, insurance premiums go up every year, pubs sell Pinot Grigio by the glass.
Yet surprises spring up far more frequently than we might imagine. Who could have predicted that the Conservative party would win a Commons majority? Or that loom bands would become a global craze? Or that Rowan Gormley would become the new chief executive of Majestic?
An equally unpredictable scenario for UK wine retail would be the demise of deep discounting – by which I mean any reductions of more than 20% off the face value. Yet there are signs that this is entirely possible.
It has been well documented that supermarket shopping is gravitating away from the existing dominance of Tesco towards newcomers Aldi and Lidl. For Tesco, promotions on wine have always been the norm, while prices are generally consistently low for the discounters.
It has always been declared that consumers like buying wine on discounts, but on this evidence it’s fairer to say that what people actually want is good value – not just the appearance of it.
Perhaps this explains why those supermarkets which always relied on deep discounting wine are now urgently reviewing their ranges in the face of falling sales. It also explains the success of the recently rebooted Oddbins, which determined to eschew the sort of deep discounting that had previously done them – and other high street chains such as Threshers – absolutely no favours in the long term. Furthermore, there are growing numbers of independent wine merchants apparently prospering without the need for discounts, beyond the traditional 10% reduction on a case of 12 bottles.
There are other factors that favour an end to deep promotions. Price comparison websites and apps are giving savvy wine drinkers a far greater understanding of wine’s true worth – though admittedly they are only used by a tiny minority. Legislation may well play a role in future too, as it has already done in Scotland, to outlaw the price promotion of alcohol. As anti-alcohol rhetoric continues to influence the health agenda, that becomes ever more likely.
And let’s not forget the will of the trade. For as long as discounts have existed, we have bemoaned their deleterious effects on profitability throughout the supply chain. As the arguments stack up against deep discounting, we should all be brave enough to practice what we preach.
Which brings me back to Rowan Gormley. For some time now there have been mutterings about the opacity of Majestic’s discounting, which offers varying percentages off various combinations of wines at varied times. There have also been mutterings about what the new chief executive might change about how the company works. What bolder move could he make than to embrace the trend away from deep discounts?
It might seem improbable – but I certainly wouldn’t discount it.