Symphony IRI has reported an increase in the amount of goods sold on deal for the second consecutive year.
Given the lingering, limp economy this should not be surprising. Further, manuacturer’s routinely try to hide commoditiy cost based price hikes with promotions. The product is priced at $2.89, goes on a deal for $2.29 and comes back at $3.19.
IRI measures 70% of the categories carried in a typical supermarket sell 30% or more of their goods on deal. The deal will include at least a price reduction, but may also include participation in the retailer’s circular ad and/or a display in store. The 70% number is up from 60% only 4 years ago.
The real news in this report was that the average lift per promotion had dropped by 57% in more than half the categories. So manufacturer’s AND retailers are promoting more and enjoying lift less. Why? Not part of the study but some educated conjecture will reveal that:
- Most promotions, event those carefully planned collaboratively by retailer and manufacturer are not implemented fully or well. In recent studies by ShelfSnap, which turns pictures of displays into data, they found less than have the planned displays built at all. Further they found a significant number of the displays built were smaller than planned, had a smaller product assortment than planned, or had the wrong assortment. In one study, the promotions were built as planned, but ShelfSnap revealed that half the stores in which the displays were built had put out price signs on the displays. Even if a consumer were attrated to the end-cap, they had no way of knowing what they would pay for the enticing products.
- Consumers become conditioned to pricing discounts and product-promotion cycles. Just as day traders develop a sense of timed pricing inflections so too do consumers react to products. Just watch how consumers flock to Costco after the monthly spate of coupons come out.
- Consumers continue to trade “down” to private label or, at least have adopted some of these “just as good” PL items as their new staple.
- Consumers have not been stocking the pantry as aggressively as they were prior to the recession. With rising commodity and gas prices this restocking trend may reverse itself in the months to come.
- Some of the “deal” lift that used to accrue to grocery stores is occuring in unmeasured outlets such as Costco and Walmart and some from pure play online providers like Amazon, or Alice who can be quite price competitive. Some of these online players have ongoing replenishment models that both offer better pricing and the added convenience of “no-thought, deliver to my door” service.
- And online – mobile coupon providers like Shopkick, as well as price comparison mobile applications such as Aisle Buyer and Scanbuy can move a prospective buyer standing in front of the shelf with a “special” price to another store with a better deal, particularly since that store is probably on the way home.
To me, the most interesting new application designed to move promoted volume away from the actual advertiser (combination of retailer-manufacturer who is sponsoring and paying for the promotion or deal) is a new service being tested by Safeway in Hawaii. Their new DealMatch program evaluates the chains biggest competitors advertised deals, and then applys that same price to their customers loyalty cards so that the customer is ALWAYS paying the lowest price at Safeway. This is one of the three legs to the author’s Shopper 5.0 model. I would guess that it will be much more complex to implement on the mainland, but if they figure it out, it is a great new move.