Promotions simply make people think that margins are so high the stores can afford to cut costs, says the company’s retail specialist Iona Carter.Last week shoppers at the major supermarkets in Reading were yet to be convinced that lower prices would be of real benefit to them.Alan Fossett, a father of three, considered sweeping price reductions long overdue. Its latest survey showed that more than half of shoppers questioned felt they were being ripped off on basic food and groceries, with three-quarters believing it would be cheaper to shop abroad. But that’s still 20p more than you would pay in downtown Chicago.No wonder shoppers are no longer as seduced by the lure of price cuts as supermarkets believe. According to the market research company Research International, we have all become far more cynical about the attempts by stores to buy our loyalty. A two-litre bottle of Diet Coke is pounds 1.29 in Tesco, Sainsbury and Safeway, and 4p cheaper in Asda.

Take bananas: in the four Reading supermarkets we surveyed, they cost 45p per lb; in the US they cost 43p The same is true of eggs In Reading they cost between 79p and 85p; in America, 56p. Stephen Byers is monitoring Britain’s grocers: he plans to compare prices on up to 100 product lines with those in Europe.American prices are even lower. A basket of 20 standard household items, including milk, fruit and vegetables, cornflakes and household goods, cost 26.62 euros (pounds 41.23) in Reading’s Asda, but in the Kaiser supermarket, Berlin, the same goods cost 25 euros, and in Auchan in Calais we were charged just 18.75 euros.So why are we paying so much more than our continental neighbours? The big retailers maintain that they have to pay more for fuel, distribution and land in Britain But time may be running out for them. The stores have been under fire from the Office of Fair Trading which last year found that profit margins in this country were three times what they were on the Continent. And according to Mike Godliman, of the retail analysts Verdict, margins are still almost three times higher in Britain than Europe, although they are beginning to fall and stores are not making “exorbitant profits”, given their size.We compared prices in British, French and German supermarkets and found substantial differences in price. Meanwhile, the other big supermarket players have hit back with pledges of similar cuts in the cost of goods.

Safeway entered the fray with its Price Cut 99 campaign, on which it is spending pounds 30m, while Tesco remarked sniffily: “Whatever others claim to do, we will better.”But when one remembers that a large supermarket sells more than 55,000 lines, price cuts on a couple of hundred items seem less dramatic.But they do highlight just how continuous competition has become in the retailing world Yet shoppers do not seem to have benefited. Its research showed that customers preferred lower prices to promotional offers. Last week the Trade and Industry Secretary, Stephen Byers, announced that fines for companies found guilty of price fixing would be tripled, but the supermarkets insist they are in a period of intense competition, which is why prices on many items are so close.So confident is Asda of the importance of price to shoppers that it has ditched that holy grail of Nineties retail marketing, the loyalty card, in favour of price cuts. Prices for apples, onions, tomatoes, Nescafe coffee, orange juice, Kellogg’s cornflakes and Stella Artois beer, matched in all four supermarkets despite the retail industry’s insistence that they are set locally according to labour and location costs. We picked a typical basket of fresh and convenience foods and household goods, coming to a little over pounds 40 in each case, and found that the store beat its nearest rival, Safeway, by 79p.However, it was also clear that costs are exactly the same for many goods. The cuts are the latest attempt at aggressive pricing since Wal- Mart took over the Asda chain in July, and follow the company’s Rollback campaign which aims to discount prices this year by pounds 200m.
Our survey of prices in the big four supermarkets – Asda, Tesco, Sainsbury and Safeway – in one of Britain’s most prosperous towns, Reading, Berkshire, showed that Asda’s prices were indeed cheaper.