INVASION OF THE DISCOUNTERS : BRITAIN : American-Style Bargain Shopping Comes to the United Kingdom

Pulling off the highway into this suburb east of London, a visitor can quickly see why West Thurrock is probably the greatest bastion of American shopping culture in Great Britain.

There are familiar names, now recognizable to most Brits, such as Burger King and Toys R Us. There’s a giant American-style supermarket, this one a British-owned Tesco.

And farther along the service road is something more unusual for Britain: a Gargantuan, thoroughly American mall called Lakeside Shopping Centre, which offers a range of department stores, scores of smaller shops, parking for 12,000 cars and the requisite “food court” with quick-service cuisine from many lands.

But it is the latest American-bred addition to this shopping tract that has brought national attention to modest West Thurrock.

Costco, the Seattle-based discount chain that recently merged with California’s Price Co., arrived here late last year, opening the first warehouse membership club in Britain amid an onslaught of media fanfare.

While that might not seem like front-page news, it was in Britain, where discount shopping is virtually unknown and consumers pay some of the highest prices in the Western Hemisphere for goods.

Indeed, despite its single location and restrictive membership rules, Costco has become one of the most visible signs of a consumer upheaval in the United Kingdom.

“There has been a shift in consumer attitudes,” said Clive Grant, director of Corporate Intelligence Group, which compiles retail information. “People are prepared to go to a discount store and shop around more. It was not the attitude before, which I know must seem strange to Americans.”

As the British rethink their shopping habits, a steadily increasing number of U.S. retailers are showing them how it’s done, American-style. With the U.S. market near saturation point, according to a Corporate Intelligence report, “there is a growing realization that the post-recession U.K. is ripe for an infusion of U.S. price-led, value-for-money, power retailing.”

Big names such as Blockbuster Video, Gap and Toys R Us have already made significant inroads in Britain. Discount giants Wal-Mart and Kmart are considering transatlantic expansion. A surge of factory outlet shops is on the way, and QVC, the home shopping network, has hit the British TV airwaves.

“They’re not here by accident,” Grant said. “They sense the time has come.”

The changing spending habits of British consumers are largely attributed to an increase in foreign travel--particularly to the United States--and a five-year economic slump.

Hundreds of thousands of Brits traveling to Florida resorts and other U.S. destinations returned with tales of amazingly low prices on every kind of product imaginable. For many, it was the first realization that British prices were inflated.

And with the recession forcing consumers to be more careful about their spending, more and more began thinking about such unusual--for Britain--notions as comparison shopping.

So it was not odd that Costco’s arrival was met with fascination. An endless stream of newspaper and television reports explained how the 143,000-square-foot store operates, compared its prices (exceedingly favorably) to established British retailers and marveled at its size and “no-frills” look.

And shoppers responded.

“I saved 200 pounds on a television,” boasted Val Morrish of nearby Corringham as she traversed a busy Costco aisle with a shopping cart filled with bulk packs of groceries.

Liz Meachin, a teacher in Kent, stood in front of a Crayola display, punching numbers into her calculator. “The prices are really good,” she said.

Meachin found she could purchase school supplies at Costco for less than they cost through the wholesale center run by the government purchasing office in her school district. After making an initial reconnaissance mission to Costco, “I went to the deputy head (of her school) and said, ‘Look, we can save this much money.’ ”

Costco Europe Managing Director Paul Moulton declined to give membership figures. “We’re happy,” he said. “We’re more convinced than ever that this is a transplantable formula.”

A second Costco is set to open in June in Watford, a suburb northwest of London, and the company is planning additional branches in Liverpool and Sheffield. Plans also are being made to enter Continental Europe.

“We’re studying hard the question of how much we’re ready to take on,” Moulton said.

Even before it opened in West Thurrock, Costco faced a lawsuit filed by Britain’s three top supermarket chains, which sought to halt plans for the warehouse club.

Costco had been granted a zoning permit as a wholesaler because more than half its sales comes from small businesses purchasing products for resale. But Tesco, Sainsbury and Safeway, which control about 60% of the British food retailing market, argued unsuccessfully that Costco should be deemed a retailer, which would put it under more stringent planning controls.

The failed legal bid served to cast Costco as the consumers’ hero, struggling against the food giants to bring low prices to Britain. As soon as Costco opened, the neighboring Tesco introduced a special “bulk buying” section that aped Costco’s grocery department.

Despite all the interest in discount shopping, U.S retailers coming to Britain must still contend with the long-established suspicion with which consumers regard low prices.

“People have been taught to equate low price with low quality,” said Simon Hinde, senior editor at Which?, a magazine published by the Consumers Assn.

“Discounting became associated with cheapness,” said Grant of Corporate Intelligence. “I do believe the British consumer has been brainwashed into accepting higher prices.”

British shoppers have traditionally taken pride in how much they spend on an item, not how much they save, Grant said. Buying from a top-name store such as Selfridges or Harrods has been preferable to finding a bargain.

“The attitude was always ‘I’ve just been to Harrods and bought this, and it cost me 5,000 pounds,’ ” he said. “Whereas the American would come along and say, ‘Look, I bought this; just as good in quality as you bought at Harrods for half the price.’ ”

Manufacturers and retailers have been only too happy to help British shoppers feel better about themselves. A survey by Britain’s Business Age magazine says that residents pay an average of 48% more than Americans for the same products and that consumers are being treated like “mugs.”

Whether it’s computers, sports equipment, cars, clothes or movie tickets, British consumers pay prices that would make the average American cringe.

For example, a pair of Levi 501 jeans costs 200% more in Britain than in the United States, according to the Business Age survey. A Wilson tennis racquet costs 186.5% more, a Ford Escort 50% more, a Swatch watch 95.8% more.

Exactly why prices are so much higher has become the subject of recent debate.

Manufacturers and retailers cite a range of reasons, including taxes, land costs, higher-quality goods and the relatively small size of the British market. But consumer advocates and government officials are becoming increasingly dubious.

“They take refuge in technical arguments,” Hinde said. “But when you look at each of these arguments, they don’t hold water. The bottom line is they’re overcharging because they can get away with it.”

The director general of Britain’s Office of Fair Trading has taken a high-profile stand against price gouging, recently launching investigations into the pricing of compact discs and video games.

New releases on CD generally cost at least $6 less in the United States, even though the products are identical. Business Age found it was substantially cheaper to buy a British-made CD at HMV, a British-owned record store in New York, than it was to buy it in Britain.

Said OFT director Sir Bryan Carsberg in a speech: “I find myself wondering whether the difference is caused by higher costs in the U.K. or by restrictive practices, such as price cartels, which are harder to track down and deal with under our competition law than the American.”

Retailers and manufacturers are armed with explanations.

For example, Business Age cited the Ford Escort as costing $15,000 in Britain and $10,000 in America. But John Gardiner, spokesman for Ford of Great Britain, said the comparison is unfair. “You’re looking at two vehicles that are different but share the same name,” he said, explaining that the cars contain different components.

However, the Ford Probe--which is the same in both countries, except for the position of the steering wheel--lists for roughly $16,700 in the United States and $24,700 in Britain, according to Ford figures. Gardiner chalked up the difference to a number of issues, such as the comparative scale of each nation’s economy, the costs of engineering right-hand-drive cars and the British insistence on buying vehicles loaded with optional equipment.

There does not seem to be a reasonable explanation, however, for the fact that British-made cars can be purchased in other European countries, and in the United States, for less than they cost in Britain.

Which? magazine said it has found instances of car dealers in Belgium operating under specific instructions from British manufacturers not to sell to British customers. And Business Age found that British car buyers could travel to the United States, buy a top-of-the-line British-made Range Rover or Jaguar, pay the shipping costs back to England and still save $7,500 “on a car that was made in this country, to much tougher American safety and emission standards, and then exported.”

Consumer electronics are yet another arena in which price differences seem inexplicable. Americans visiting Britain will notice that a stereo selling for $600 in the United States is likely to sell for about $900 in Britain.

Dixons, the largest consumer electronics retail chain in Britain, says the differential is not its fault. “It’s a manufacturing issue,” said Nicola Marsden, corporate affairs officer. “We, as the retailer, have very little control.”

At Sony, one of Dixons’ major suppliers, corporate communications general manager Bill Vestey said there is a “raft of reasons” for the price disparity.

“Primarily, the products are different,” he said, also alluding to currency fluctuations, property prices and the size of the national markets.

“Safety standards are different,” Vestey added. Asked if that meant Sony products are safer in Britain than the United States, he said, “I’m not an engineer.”

Ultimately, consumer researchers and advocates believe, there is not a credible reason why things cost more in Britain.

“One doesn’t say or like to use the word conspiracy ,” Grant said. “But it does seem to me that ‘an historic association,’ if you will”--he let out a slight laugh--”which is designed to keep prices high, has become an accepted way of doing things.

“It’s only when these accepted ways are challenged that people say, ‘Hey, I don’t want to pay all that.’ Unfortunately, a lot of people still do. But increasingly, people are challenging it.”

Back at Costco, American Marilyn Land and her English husband, Harry, were browsing through the electronics department after stuffing their cart with large quantities of items such as wine, toothpaste, butter and toilet paper.

After six years in England, Marilyn Land was heartened when she learned Costco would be opening within striking distance of her home in Romford. And she puzzled at the attitude of her British neighbors, who had no interest in checking out the new store and predicted “there would be two cars in the Costco car park.”

“There’s such a big resistance to change here,” the Boston native said with a sigh.

Nonetheless, she believes change is on the way. “Look,” Land said, pointing to Costco’s nearly full parking lot. “You can see it.”

Can We Shop?

Discounting--one of the engines driving retail competition in the United States--is just beginning to make its impact felt on retailing in Britain and Japan. With a handful of exceptions, only home-grown staples cost less in those nations than in America.

U.S. British Japanese Product price price price Apples, 1 lb. $0.46 $0.75 $1.97 Big Mac 1.30 2.72 3.74 Bread, loaf 0.58 0.90 1.77 Cable TV, premium service, per month 16.50 47.28 38.35 Camera, Canon EOS 266.00 600.44 648.97 Chicken, 1 lb. 0.65 1.71 4.92 Coca-Cola, one can 0.25 0.38 0.79 Dry cleaning, suit 4.66 11.93 7.87 Dry spaghetti, 1 lb. 0.66 1.47 2.26 Eggs, one dozen 1.57 2.03 1.77 Film, Kodacolor Gold 100, 36 exposures 3.06 6.29 5.65 First-class letter, domestic 0.29 0.38 0.79 Laptop computer, Apple Powerbook 800.00 1,579.16 1,474.93 Potatoes, 1 lb. 0.22 0.30 1.38 Videocassette tape, 120 minutes 2.00 4.50 3.93

Note: U.S. and British prices are as of late January. Prices were converted to dollars using exchange rates for Feb. 1. Japanese prices are as of late April and were converted to dollars using exchange rates for April 29.

Sources: Los Angeles Times Tokyo bureau; Business Age magazine, London.