Cheap hi-fi hopes 'dashed'

Verdict says scrapping the RRP will make little difference in prices

Hopes that a clampdown on price-fixing could lead to much cheaper electrical goods have been dashed by a new report.

The government has decided to make it illegal for manufacturers to tell shops the prices at which their goods should be sold. They are also to be banned from cutting off supplies to shops offering discounts.

The scrapping of the Recommended Retail Price system in electrical retailing, is due to come into effect in September. It sparked hopes that shoppers would see prices fall by up to 20%.

But a report by retail consultants Verdict says the government's action will make little difference to prices in the shops.

Apart from the Dixons Group, which takes in Currys and PC World, most electrical retailers were only squeezing out "wafer thin" profits, argue the report's authors Clive Vaughan and Richard Hyman.

Shops would have to charge more for many products, including TVs, washing machines and hi-fi systems if they were not selling warranties which have also been criticised by some consumer groups as over-priced, they said.

"Customers are getting the best deals a highly competitive retail environment can deliver," said Mr Vaughan.

"All this nonsense about retailers operating a cartel...well, if no-one is making any money, it isn't a particularly good one."

Verdict said the government had taken "a sledgehammer" to the electrical goods market.

The fact that many shops offered similar prices demonstrated that competition was working, the report argued.

The price of many electrical products, particularly personal computers, dropped sharply as sales increased, said Mr Vaughan, adding: "Can you imagine car manufacturers doing that?"

The Verdict analysts said they did not believe scrapping RRP would lead to an explosion of discount stores because the market was already crowded, and shoppers were looking for high standards of service as well as low prices.

They forecast an explosion in the sale of digital TV products as the industry prepared for the biggest change since the switch to colour in the 1960s.

They also predicted that the "inexorable migration" from high street shops to superstores on retail parks would continue.

Over the past decade the superstores' shares of the market has risen from 10% to 35%.