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£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.

Supermarkets could introduce e-pricing model

Retail experts have predicted that fixed retail prices could disappear within five years, as supermarkets adopt an e-pricing structure that changes based on demand.

The new ‘surge-pricing’ model, similar to that of taxi firm Uber, is a system which is already common in the US and across parts of Europe, and could see the prices of goods change depending on demand and the time of day.

Electronic price changes were tested in a selection of Marks & Spencers food stores last year in a bid to help the lunchtime rush in their stores, with discounts offered before 11am.

Experts have suggested that similar systems could also be used at petrol pumps.

Andrew Dark, from electronic pricing company Displaydata, said: “Paper tags often show the wrong prices as they have to be manually replaced by staff when prices move, but electronic labels can be updated in just 20 seconds.”

A Sainsbury’s spokesman said: “We always look at ways that technology can help us improve the shopping experience for our customers.”

Tesco and Dixons Carphone forge new deal

Tesco has confirmed a new deal with Dixons Carphone to trial concessions within some of the retailer’s largest supermarkets.

Dixons Carphone, which owns tech retailer Currys PC World, will launch two new outlets this summer in Tesco Extra stores located in Milton Keynes and Northampton.

Both concessions will stock a range of Currys PC World products, including white goods, computers, televisions and accessories, along with Dixons Carphone laptop repair service.

In a direct response to its key rival Sainsbury’s inclusion of Argos stores, Tesco said the new partnership would offer customers the “best possible range of services”.

Both stores will be on trial for a year before any decisions are made regarding further roll-outs.

“We’re always looking at ways to offer our customers the best possible range of services in our stores,” Tesco UK chief executive Matt Davies said.

“We think this is a winning combination for customers and look forward to opening the first outlet in our Milton Keynes store in July.”

Dixons Carphone’s UK and Ireland chief executive Katie Bickerstaffe said: “Customers tell us they want to pick up the latest electrical products conveniently and at competitive prices, with expert advice and from someone they trust to keep them working seamlessly.

“This trial gives them all of this during a weekly grocery shop, which we hope they will enjoy.”




Slower shoppers ‘can help boost supermarket sales’

New research has revealed that supermarkets can control the speed of shoppers, helping to boost supermarket sales.

A study by Rotterdam School of Management, Erasmus University (RSM) observed 4,000 people in a series of experiments conducted in both supermarkets and in laborites, demonstrating that retail managers can persuade customers to walk at an ideal pace through the aisles by altering lines and patterns on the floor.

Closely spaced, horizontal lines, slowed the pace down at which shoppers travelled through the store, encouraging them to browse. Widen the gaps between the lines and the shoppers moved much more quickly.

Bram Van den Bergh, who led the research, said: “Managing the flow of customers can be a challenge for retailers. When customers rush through the store, they miss interesting products and buy less. Spending too much time in front of the shelves can lead to annoying congestion in the aisles, which also leads to declining sales.

“It has been known for some time that walking speed plays an important role in shoppers’ purchasing decisions. But until now it was unclear what retail managers could do to influence the pace of their customers. This research was set up to find out how they might achieve this.”

The perception of the length of the aisle was altered by shortening and widening the lines, making shoppers believe that the aisle was nearer/further away, causing them to speed up/slow down.

Subsequent tests also showed that slower shoppers were much better at recalling products that they had seen on the shelves.

The researchers related their findings to goal gradient theory: when an individual is closer to their goal, in this case, the end of the aisle, they will walk faster to reach it.

Supermarkets need to take action against obesity, says Which?

The consumer rights watchdog, Which?, is urging supermarkets to ‘do their part’ in the fight against obesity, as new data collected by mySupermarket shows that, of the 77,165 promotions where nutritional data was available, more than half (53 per cent) were on less healthy foods.

Further analysis of the data – which looked at the balance of healthy and less healthy promotions available in ASDA, Morrisons, Ocado, Sainsbury’s, Tesco and Waitrose between April 1 and June 30, 2016 –- also found 52 per cent of confectionery was on offer compared to just one third of fresh fruit and vegetables (30 per cent and 34 per cent respectively). In addition, seven in ten (69 per cent) of soft drinks that would fall under the government’s proposed sugar tax (more than 8 per cent sugar) were also on promotion.

Director of Campaigns and Policy at Which?, Alex Neill, commented on the results: “Everybody has to play their part in the fight against obesity and people want supermarkets to offer more promotions on healthier foods and yet our research found the opposite. It’s time for supermarkets to shift the balance of products they include in price promotions and for all retailers to get rid of temptation at the till by taking sweets off the checkout.”

In a separate study, Which? found 29 per cent of people claim to find it difficult to eat healthier food as they believe it is more expensive than less healthy alternatives; proving to be the top reason provided for not eating more healthily.

Moreover, 51 per cent said supermarkets should include healthier choices in promotions to make it easier for people to choose healthier food. This was the top action consumers wanted from supermarkets, followed by the production of healthier options at cheaper prices (49 per cent) as well as creating foods with less fat, sugar and salt content (49 per cent).