Leading Article: Shoppers are smarter than the stores think

THE BRITISH Retail Consortium's report that consumers are staying away from the sales has been taken to mean that consumers are frightened by predictions of recession. They have not been the only figures that can be read in this way: business surveys and official statistics have told the same story for months.

Doom-sayers have been ready to seize on evidence of impending recession. They argue that consumers are holding on to wages and savings longer, to cushion the blow of economic troubles. If price-cutting were to take hold in the desperate competition of a recession, then consumers will want to wait until they see how far prices fall.

This case does not stand up to sustained scrutiny. December surveys also showed that shoppers were saving more than they had the previous year, in order to spend in the sales. What looks at first sight like a sustained decline in sales may simply be the effects of a far better informed public, refusing to play the retailers' game in the run up to Christmas when they knew that large reductions will be available in January. We are willing to bet that January will turn out better than retailers are now predicting.

British retail chains continued until recently to enjoy large profit margins, undisturbed by the competitive storm blowing through other industries. Established names have been happy to trade on their high visibility and reputations, with results that are now apparent. Even Marks and Spencers, that bastion of the British High Street, is seeing itself squeezed.

Customers who travel to the USA and to continental Europe know that many goods in British stores are overpriced. They note that most items can be bought in America for two-thirds of their British prices. They are less willing to be taken for a ride, and are holding on to their savings not in fear of losing their jobs, but in the certain knowledge that they will soon buy more.

This process will continue, and accelerate. With the advent of the euro, it will be more difficult to hide how much more Britons pay for their purchases. The increased trade it will stimulate will mean more pressure to be allowed to buy goods, such as cars, that are much cheaper elsewhere in the European Union. Internet shopping, allowing consumers to buy from stores anywhere in the world, will make it more difficult for retailers to hide.

Inflation may continue to abate in the year ahead, and deflation take hold in many sectors: those shopping centres attracting the crowds yesterday were those containing shops offering the heaviest discounts, such as Lakeside in Essex. But a fall in prices need not always be feared, in Britain at least. For all the cries of pain from High Street shops, it will constitute a correction to their over charging, and a welcome end to the complacency that has allowed them to live on their past glories for far too long.