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Discounts saw December prices slide

Shop prices slid deeper into deflationary territory in December, falling 0.6% on 2016 compared to the 0.1% decline in November, according to latest figures from the British Retail Consortium and Nielsen.

This is the deepest deflation since March 2017.

The BRC Nielsen Shop Price Index also revealed that non-food prices fell at their fastest rate since January 2017, declining 2.1% year-on-year compared to 1.1% in November.

Food inflation gathered steam, however, with inflation increasing to 1.8% in December, up from 1.5% in November. Fresh food inflation picked up, increasing to 2.0%, a significant increase on November’s 1.3% rate.

“After several months of shop prices teetering on the edge of inflation, December saw them retreat deeper into deflationary territory. Prices in December fell at the fastest rate since March this year when only last month we saw the shallowest rate of deflation for four years, said Helen Dickinson OBE, chief executive at the British Retail Consortium.

“This is good news for shoppers. Retailers offered lower prices at the beginning of December than last year on many of their non-food ranges, providing welcome options for Christmas shoppers on a stretched budget. These discounts allowed consumers some much needed breathing room during the festive period at a time when the cost of their food shop is on the rise.

“Food inflation picked-up pace this month, fuelled by climbing global food prices earlier in the year. While retailers will continue to do their best to absorb cost increases for their customers, the challenges to the industry remain stark with more inflationary pressures in the pipeline.

“Therefore, this year we will continue to press the Government for clarity on the principles and terms around the Brexit transitional arrangements, to ensure businesses have the certainty to plan and invest and that consumers don’t face higher costs or delays from tariffs or onerous customs barriers.”

Mike Watkins, Head of Retailer and Business Insight at Nielsen added: “The SPI inflation rate is below other inflationary measures, showing there is little inflationary pressure coming from retailers. With consumer confidence wavering and unpredictable levels of demand, many non-food retailers have been keeping prices low to stimulate spending, which will undoubtedly have come at a cost to margins.  Whilst food prices have edged up a little due to supply chain increases in fresh and seasonal foods, pricing across Supermarkets will remain competitive as we start 2018 with consumers still coping with higher household bills.”


£3.7 billion worth of discounts disappear from supermarket shelves

IRI’s Price and Promotion study has revealed that the pressure on UK retailers to be more transparent in their pricing has seen the number of trade promotions fall to their lowest levels in 10 years, with shoppers receiving £3.7 billion less in promotional savings in 2017.

The study analyses over 300 categories within UK major multiples (to 27 May 2017) to see what impact the reduction in promotions is having on category performance. The study shows that there has been a 25 per cent reduction in the number of items on offer in stores since November 2012, when the Office for Fair Trading (OFT) first released its guidelines on promotions.

The average number of grocery lines on promotion this year has declined by 13 per cent, resulting in an 18 per cent fall in consumer savings via promotions compared to 2016. Volume on deal (VOD) has also dropped by 6.4 share points, the fastest since it started declining in 2014, and is now at its lowest level for almost a decade.

According to IRI, the amount saved by shoppers, had they bought a product at full price – known as ‘promotional giveaway’ – fell to just 11.1 per cent by April this year from its previous high of 13.9 per cent, representing a potential loss of GBP 3.7 billion in deal savings (based on an annualised total for 2017).

Tim Eales, Strategic Insight Director for IRI and co-author of the study, says: “Retailers and suppliers have been under pressure to change the way they do promotions, notably from the OFT, now CMA, who set out guidelines around pricing transparency a few years ago. We’ve also seen market share gains from discounters with their simplified approach to pricing, along with changing shopper habits and, more recently, increased cost pressures, such as the impact of sterling devaluation on manufacturer and retailer margins.

“While our study shows little change in the level of promotions until 2015, retailers are now moving away from the short-term benefits of tactics like multi-buys and price cuts to get customers through the doors, and replacing them by fewer promotions, driven by a need for more promotional efficiency and effectiveness. Our advice is to look for categories where the sales uplift from individual products on promotion delivers benefits for the category as a whole, meaning a win-win for both supplier and retailer.”

The IRI Price and Promotion – The Big Question white paper and infographic are available for download on the IRI website.