back to menuBecause of the strong pound, British visitors to most of the rest of Europe do find that many everyday items are cheaper than at home. Different tax regimes also create bargains. But do these differences result in a rip-off? There are instances when, despite the strong pound, we pay less than those in most of Europe for goods. What is clear, however, is that we all pay more than US consumers for most goods and services.
The Department of Trade and Industry has taken seriously the question of "Rip-Off Britain". From January 2000 the DTI say they will start issuing a price list of 100 frequently purchased goods and services across the UK, the USA and selected European countries. It will be interesting to see what effect the Wal*Mart take-over of ASDA has. ASDA has already announced a price-cutting operation.
One sub-sector of the UK retail market which has attracted its share of criticism is that of electrical goods. Dixons Group plc (a longstanding NfCG Corporate Associate) commissioned an independent study by Arthur Andersen into the pricing of electrical goods in the UK, USA, and six other European countries. The study concludes that:
"Within Europe there is no systematic tendency for the prices of electrical goods and personal computers (PCs) to be higher in UK than in the rest of Europe. Prices are high for some goods, notably vacuum cleaners, but relatively low for others, such as video cassette recorders".
The survey found that prices in the USA, with the exception of some white goods, are substantially lower than in Europe. This is partly explained by the fact that the cost of doing business in the USA is lower than in Europe. Property, distribution costs, sales taxes, and wages, are all cheaper in the USA. This has a direct effect on retail costs and, therefore, prices. In addition, product specifications, which are usually lower for brown goods in the USA, make a difference.
The term ‘brown goods’ means audio systems, cameras and camcorders, televisions, video recorders and the like. ‘White goods’ are refrigerators and freezers, washing machines and dishwashers. Arthur Andersen surveyed two other classes of goods, small domestic appliances (irons, toasters, vacuum cleaners etc.) and personal computers and found that, for household electrical goods, the UK is in the lower price range in Europe for most categories, with the USA always the cheapest. When you look at the categories you find an interesting picture with variations which are difficult to explain. For instance, we, in Britain, pay significantly more for small domestic appliances (especially vacuum cleaners) and generally less for brown goods.
Prices of televisions vary less than expected, but that fact hides a complex situation. In Britain we buy more wide screen TVs than the rest of Europe, and they are relatively expensive here, distorting the picture upwards. We also buy more small portable TVs than the rest of Europe, twisting the picture down again. Most VCRs and camcorders are cheaper in the UK than in the rest of Europe, so down goes the comparison again.
The success of the Dyson and its competitors in the vacuum cleaner market has pushed up the average price in the UK, where over half the vacuum cleaners sold are the more expensive upright beat and brush variety. However, in France and Belgium, the only other countries in Europe where it is available, the Dyson is 25% more expensive.
Price itself is just one of the factors, and to shout "rip-off" may well be premature.
The report raises several matters of concern:
Brand prices: Some popular brands show large variations across borders. As national boundaries and where you buy from gradually become less important and e-commerce becomes a viable alternative, these variations will have to even out. Whether the authorities should, or could, influence the position is another matter, given that (as in this survey) differential prices work both ways for the UK.
Brand specifications: the fact that items with the same serial numbers across markets have different specifications will not surprise the Plymouth Consumer Group (PCG) who found that, just in Plymouth, comparing like with like in white goods was beset with specification problems. The report wonders, as did the PCG, whether manufacturers do this to make comparisons more difficult.
The British Brands Group (another NfCG Corporate Associate) has also issued a Comparative Retail Costs report, the result of a study into why UK consumers often pay more than US consumers for the same products. Their conclusions were, not surprisingly, much the same as those made by Arthur Anderson, that the retail environment in the USA is very different to Europe. Cheaper property, lower wages, distribution costs and taxes all result in lower retail costs. Also retailers are larger and benefit from huge economies of scale, greater operational efficiency and lower overheads. This means lower prices for US consumers who are prepared to buy in bulk, and who buy more.
The British Brands Group concludes that, in the UK, retailers are not making excessive profits; they are largely similar both to those in the USA and in Europe. Superstore retailers in both markets enjoy margins of around 6% or 7%. While American shoppers enjoy lower prices, the report suggests that we are getting a fair deal. Nevertheless, if you are in America anyway, take the opportunity to make purchases if you can, as prices are 25 to 30% higher back home; and if you are in continental Europe and need one, buy a vacuum cleaner, but not a Dyson!
John Brown.This letter from Marie Jennings (NfCG Chairman) to the Editor of The Independent, appeared in the Tuesday Review on 5th October.
End this rip-off!
Every day we read and hear about ‘Rip-Off Britain’. It is a slick and understandable phrase. I would suggest, however, that this is one soundbite which may well bite back.
Hanging a ‘Rip-Off Britain’ shingle around the neck of the country at large is doing no favours for our hardworking industrialists who try to keep the economy healthy, nor is it helpful for those companies struggling to develop export markets in this ever more competitive world. Besides, the phrase can hardly be said to be true across the board.
May I suggest that the spin doctors turn the record over and see what is on the other side. The ‘Rip-Off Britain’ tag may prove to be very expensive indeed.
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