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Reserve Bank warns businesses are going bust due to cutting prices to lure customers

Bargain hunters are blamed for hurting the economy as Reserve Bank warns too many businesses are going bust trying to lure customers with discounts

  • ‘Price sensitive’ customers are forcing Australian retailers to slash their prices
  • Businesses are now feeling the pinch after being forced to please customers
  • Retailers are now competing with the rise and popularity of online businesses 

Stingy customers demanding discounts have been blamed for sending retailers broke and damaging the economy. 

Australian businesses have been pressured to drastically slash their prices to meet consumer demand to remain in the cut-throat retail industry. 

But now retailers are feeling the pinch after being forced to slash prices to please ‘price sensitive’ buyers, the Reserve Bank of Australia has warned. 

Stingy customers have been blamed for damaging the economy by forcing businesses to shut up shop as they increasingly demand discounts

‘Firms suggest that consumers in the retail sector are increasingly price sensitive,’ Matthew Carter wrote in the new Competition and Profit Margins in the Retail Trade Sector report. 

‘They have had to adjust their pricing behaviour, typically by increasing the size or ”depth” of discounts on their products.

‘Retail goods, such as furniture, food, clothing and footwear, comprise around one-third of the Australian Consumer Price Index.’

Retail businesses have had to compete with online giants such as Amazon and Kogan. 

Part of the problem is that retailers who lure in customers and expand their reach by heavy discounting are perceived as market leaders.  

In turn, other retailers are forced to follow them by seeking the ‘lowest price position’ – further cutting profit margins in order to please frugal customers. 

Australian businesses have been pressured to drastically slash their prices to meet consumer demand to maintain a competitive edge in the retail industry

Australian businesses have been pressured to drastically slash their prices to meet consumer demand to maintain a competitive edge in the retail industry

‘This increase in discounting behaviour by retailers has been one of the factors contributing to low inflation outcomes in the Australian economy in recent years,’ Mr Carter wrote. 

In late 2018, menswear retailer Roger David went into voluntary administration after saying the company could not compete with international and online retailers. 

As bargain hunters remain adamant on spending less, businesses are forced to shut down and are slowing down the economy.

The $320billion retail industry is the second largest employer in Australia.

But now retailers are feeling the pinch after being forced to decrease prices to please 'price sensitive' buyers, the Reserve Bank of Australia has warned

But now retailers are feeling the pinch after being forced to decrease prices to please ‘price sensitive’ buyers, the Reserve Bank of Australia has warned

Read more at DailyMail.co.uk


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