Could price-cutting be over in 2009?

Will we see a cessation in rampant price-cutting from UK retail this year? That was the question from trade experts this week, as the High Street began to contemplate its reaction to Argos’ bold step of raising – not dropping – prices in its new catalogue.

Leading outlets have told MCV they are closely monitoring the surprise move from their age-old competitor – which has forged a reputation for ‘going first’ with eyebrow-raising deals on both software and hardware.

The news comes less than a week after MCV revealed that publisher Activision had increased its usual RRP for triple-A Christmas release Modern Warfare 2.

Both Marks & Spencer and Next have also admitted they are being forced to raise their prices – highlighting the frailty of non-food retailers’ margins during a crucial shopping year.

Verdict Research consultant James Flower told MCV: Games retailers have UK prices set by the manufacturers, and they don’t buy from abroad as much, so are less affected by the weak pound.

"However, talking broadly, their margins are being squeezed and they face many of the same pressures as Argos. It’s getting to the stage where they effectively need to raise their prices, too.

However, such a competitive market makes it hard to do so. It’s likely the best way they will achieve this will be by higher margin bundles and less price cutting across software. Games being sold by a big proportion under their RRP will become less prevalent.”

When asked if Sainsbury’s would be raising prices on games this year, a spokesperson told MCV: We will continue to monitor the rest of the market, however will always remain competitive.”

Asda’s entertainment boss Fergal Gara commented: We will have to see whether that [Argos] move is relevant to video games or not. Our stance is that we want to remain competitive.”

Morrisons declined to comment on the subject.

An HMV spokesperson said: [Price rises] are not something we are considering at present.”