Stuart Farr offers sound advice on the rules and regulations surrounding sales boosting promotions just in time for the Christmas rush
In the timeless classic, Dickens’ A Christmas Carol, the ghost of Jacob Marley despairs over ‘life’s opportunities misused’. Scrooge, trembling with fear, tries to appease the ghost by saying “But you were always a good man of business, Jacob.” The ghost’s sharp retort is perhaps one of the more moving statements in the classical literature of its day: “Business! Mankind was my business. The common welfare was my business; charity, mercy, forbearance and benevolence, were all my business. The dealings of my trade were but a drop of water in the comprehensive ocean of my business.”
With that in mind, the festive period is a time of year where retailers, quite naturally, seek to enhance their selling activities and promote seasonal items to add ‘the cream’ to that year’s trading and profit. Sales promotions abound and nowadays one expects to see the whole process starting to move up a gear from around the month of October. The aim is, I assume, to catch hold of those customers who want to get their Christmas shopping well and truly out of the way before the festivities start in earnest. Autumn sales, winter sales and one-off promotions have become so common place that consumers now have an expectation that they will occur in the retail market at particular periods during the year.
The aim of sales promotions is to incentivise consumers to buy products, to build customer loyalty and brand awareness. As a marketing tool they can be very powerful and because of that it is hardly surprising that an intricate web of regulation has evolved in order to provide minimum standards for those who might be inclined toward engaging in activities that are less than benevolent.
One of the most common sales techniques used to promote sales involves free offers, the ‘buy one get one free’ offer being an obvious example. The conduct involved in pricing within advertising is largely self-regulated in the UK. The British Code of Advertising, Sales Promotion and Direct Marketing (The CAP Code) is perhaps most relevant, and is enforced by the Advertising Standards Authority. The CAP 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 bought 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.
It is always helpful to bear in mind the underlying principles of the CAP Code which require that promotions should:
■ Be legal, decent, honest and truthful
■ Be prepared with a sense of responsibility towards consumers and society
■ Adhere to the principles of fair competition
Generally speaking, retailers are best advised to seek legal advice when considering running promotions with prizes, prize draws, instant win offers and others of that ilk. These forms of promotions carry the risk of 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.
In other respects, certain activities are neither unlawful nor regulated. Some of these may benefit the retailer whereas others are much more consumer-orientated. For instance, there is no legislation specifically addressing the activity of loss-leading on the part of a trader. Provided the activity does not contravene the UK’s complex competition laws then it is an acceptable method of sales promotion. Please note that I exercise caution with reference to the sale of alcohol at slashed prices in this, not least because this topic has been receiving a high degree of public and official scrutiny.
Showrooming has caused considerable consternation for certain traders. This involves the practice of examining products in a retail store and then buying it online or elsewhere often at a cheaper price. In terms of the gun trade, this activity applies mainly to the accessories market because the ‘in person’ legal requirements in relation to gun-buying tend to make this activity less common. However, showrooming generally is all perfectly legal and the consumer is entitled to buy from wherever he or she chooses. It can be costly for those retailers who operate from ‘bricks and mortar’ premises. Showroom samples of products can deteriorate through frequent examination. Most significantly, sales representatives can spend inordinate amounts of time fielding queries from consumers who have no actual intention of buying from the store. This can lead, in turn, to a loss of sales due to a reduced ability to engage with ‘genuine’ customers of the store.
Many retailers have tried to combat this practice by reducing their own prices or adding value in different ways to those traders who operate either online or from premises with much lower overheads. 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. Competition remains fierce but this is one aspect where the law does not intervene directly, because public policy demands consumer choice.
Finally, albeit not entirely consistent with the spirit of Christmas, one should perhaps consider the rather delicate question of the unwanted Christmas present. Traders will be relieved to know that, from a legal perspective at least, any expectation of charity, mercy, forbearance or benevolence does not extend to giving exchanges or refunds on goods that are not faulty.
But as ever, there is still a sting in the tail because it is well known that a number of high-profile high street retail outlets do give refunds and exchanges in such circumstances and will even issue gift receipts for that specific reason. More often than not, these retailers operate a system for returns to ensure consistency of approach. This also helps them avoid customer complaints in circumstances where the retailer is not, in fact, obliged to do anything and is at liberty to adopt an entirely discretionary approach.
Ironically, however, offering the ability to return unwanted gifts is a largely unregulated sales promotion technique in its own right. It serves to generate loyalty as well as encouraging the consumer to buy the item in the first place. If the recipient of the unwanted item wishes to return it then it at least gives the retailer the opportunity to get the customer back into the store, at which point they can showcase their new ranges or other sale items.
In summary, then, the law does not encourage traders to behave as Old Marley did in his fictitious lifetime of business. Indeed, in a variety of ways, the law actively prevents you from doing so. Keeping your new and ongoing promotions under scrutiny should be a regular practice. That said, the spirit of competition can and does provide its own unique challenges. Reacting positively and responsibly to those challenges can bear fruit for gun dealers, but do keep to the rules and regulations so that you avoid criticism for those ‘opportunities misused’. With that said, I wish you all a very prosperous festive season.