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Promotions plunge taking 18% from shoppers pockets

Shoppers face missing out on almost £4bn of promotional savings during 2017, with the number of offers in significant decline as supermarkets and brands come under numerous pressures, including the need for pricing transparency and the discounters’ growing market share.

The average number of fmcg lines on promotion in the mults, Iceland and the Co-op fell year on year by 13% from February to May, resulting in an 18% reduction in consumer savings compared with the same period in 2016. Brits would benefit from £3.7bn less in savings were the trend to continue for the rest of 2017 [IRI Price and Promotion Study 2017].

The price of everything – or the value of nothing

This year’s decline is the latest in a longer downward slide. There has been a 25% reduction in the number of items on offer across 300 categories since November 2012, when the Office of Fair Trading (now the Competition & Markets Authority) released its guidelines on promotions. “The rules had put retailers and suppliers under pressure to change the way they offer savings and to be more transparent,” said Tim Eales, director of strategic insight for IRI.

“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,” he added.

Britain’s biggest supermarkets appear to be switching back to multibuys, though, despite promising to make pricing simpler for shoppers, reported by Assosia.

Across the UK’s major mults, x for y deals accounted for 24.7% of total featured space promotions last month, up 5.5 percentage points from the same four-week period in 2016. Bogofs were also up slightly, though they still only accounted for 1.6% of total deals.

At the same time, save deals were down by 10 percentage points year on year, accounting for 60.2% of deals, compared with 70.6% of deals at this time last year. As a result, multibuys accounted for 26% of promotions, up from 20% last year.

“Going against the usual trend, all retailers reduced save deals and increased multibuys compared to this time last year. Waitrose made the biggest change, increasing multibuys by 18.8 percentage points year on year to account for 43.2% of its total featured space promotions,” says Assosia director Kay Staniland. Part of the push back towards x for y offers might be “savings related”, Staniland adds, with save offers giving an average saving of 29.7% last month, while multibuys offered only 24.1% savings on average.

Average savings were down year on year across most of the major mults with the exception of Tesco and Sainsbury’s.

Sainsbury’s has reduced the number of total featured space promotions in stores – by 12.5% month on month and 24.7% year on year – but average savings were up 1.5% on last year. This was despite the supermarket ramping up its use of both the x for y and bogof mechanics.

Tesco has increased the number of deals in stores by 2.2% and average savings by 1.2%, both year on year. Multibuys accounted for 25.4% of its deals, compared with 19.7% last year.

“With an average % saving of 34%, Co-op (despite having the least promotional activity) appears to offers the best deals,” adds Staniland.

 

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How this works in real life XD.

Aldi And Lidl Now Account For 10% Of Grocery Market

Latest grocery share figures from Kantar Worldpanel for the 12 weeks ending 8 November show the combined share of the discounters Aldi and Lidl has reached 10% of the UK grocery market for the first time, whilst Sainsbury’s became the first big four supermarket to claim a market share increase for over a year. .

Lidl’s market share reached a new record high of 4.4%, increasing by 0.7 percentage points on last year thanks to a sales growth of 19%. Aldi grew sales by 16.5%, keeping its market share at 5.6% for the fifth consecutive month.

Fraser McKevitt, head of retail and consumer insight at Kantar Worldpanel, commented: “If you look back as recently as 2012 Aldi and Lidl only held a 5% share of the market, and it had previously taken them nine years to double their combined share from 2.5%. In the last 12 weeks the two retailers have attracted another additional million shoppers compared with last year while average spend per trip has increased by 4% to £18.85, which is 78p ahead of the total retailer average. The discounters show no sign of stopping and with plans to open hundreds of stores between them, they’ll noticeably widen their reach to the British population.”

Meanwhile, despite the high-profile Christmas advertising campaigns launched by the supermarkets in recent weeks, the overall market remained slow. Total sales were only up by 0.5%, held back by persistently falling prices which remained down by 1.7% on a like-for-like basis.

Sainsbury’s was again the only one of the big four in growth, flying in the face of the tough market conditions. It’s 1.5% increase in sales was sufficiently ahead of the market for the retailer to increase its share by 0.2 percentage points – the first share gain registered by any of the big four retailers since October 2014.

Sainsbury’s robust performance means it has once again regained its position as the UK’s second largest supermarket, leapfrogging Asda. With its strong focus on food, the retailer traditionally increases its market share over Christmas, and Kantar Worldpanel expects to see it keep hold of second place for the time being.

The other major retailers continued to struggle with sales at Tesco down by 2.5% while Morrisons saw a fall of 1.7%. Asda saw a decline in sales of 3.5% with Kantar Worldpanel saying the chain will be hoping that its raft of recent announcements including a range reduction and increasing click & collect opportunities can boost performance in the weeks ahead.

Waitrose and the Co-operative both managed to grow sales during the period, up by 2.7% and 1.5% respectively. The Co-operative’s market share gain of 0.1 percentage points to 6.3% was its first year-on-year share gain since 2011, when the benefits of the Somerfield acquisition were still being felt.

RVS feel that this is a paradigm shift away from the middle ground of Asda, Morrisons Sainsbury and Tesco. Tesco have done most to address this by their clear focus on brands to which shoppers are loyal. Asda, with a focus on olely price, and much higher per square foot costs has few places to go. Both the Coop and Waitrose are further away from discounter competition. With the launch of the new Lidl “just like Waitrose” format perhaps their time is yet to come.

drive time to discounter

 

What you NEED to learn from Tesco if you want to grow your brand

Whichever way you cut it, Tesco are still the largest UK grocery retailer. They also have access to the most detailed customer data in the country. Up to now, they have not known how to use it. If they had, they would not have suffered the recent serious reverses.

But now they do. Very few retailers have ever undertaken the kind of root and branch reform that Tesco have, and they are taking it very seriously.

They realised, much later than they should, that the shopper really is King.

The moment they forgot that, they inbuilt the assumption that their shoppers had no choice. They prioritised selling more to basically herds of sheep, and were staggered when poachers arrived. to find that sheep actually had minds of their own, and simply followed my leader to other retailers.

The Tesco Reset View

Instead of tinkering round the edges that most of their competitors have done, Tesco took the brave decision to look outside of the ranks of the faithful, and actually base their listing on shopper needs, not just the pipe dreams of the financial guys.

This is what they came up with. The CPS score. I assume that this was what the Boston Consulting Group were briefed to do based on the shedloads of data that is available.  I am told that they split products into 4 categories based on these scores by the brands we deal with, and that if you are in the lowest group, you absolutely cannot retain your listing. 

Even if you have great turnover – such as Carling – but end up as being easy to substitute, you are absolutely bound to get de-listed.

Absolute sales value is not mentioned at all on this scale.

Merely increasing your sales before a review by running yet another discount will help your case not at all. In some cases it will actually harm it, since it will highlight the ease with which you can put up sales, and the equal ease with which customers will desert the brand afterwards. Core sales are a priority – not total sales.

What you actually need is to attract more customers who buy you for your brand values, and build these up, so the CPS score improves. In short, you have to build a brand. I gather that Tesco are expected to deliver encouraging results this week, and I for one, am not surprised.

They are aiming to create an environment that prioritises brands with real, and intrinsic loyalty, and not those selling off the back of being in the right place, at the right time, and undercutting the competition. In short they are prioritising loyalty above all.  Not Clubcard, follow my leader to the deal sheep behaviour, but honest to goodness real live choice that customers actually value.

But how can you know if your brand appeals to sheep, or goats?

FREE dunnhumby data (yes I do mean free)?

Well, you can get this help if you are an SME (less than £6.5 million turnover). Tesco make available dunnhumby data that will let you see your score. This is not offered directly by Tesco but through third parties. Click here for details

If you are larger than this and you simply feel you need to know how the buyer views you, then this is a great. However, it is worth more than this. Your score in Tesco, would also be your score in other retailers. It is a shopper score, not a Tesco score.

Tesco have spent many millions building a score that goes straight to the heart of your consumer. Why would you not want to know this?

Marketing to Goats

Brands need to pay attention to this rating scale to understand what shoppers feel about them. A good CPS rating score ought to be a signal for rejoicing in discussions with other retailers, as well as in planning for growth and brand investment. A poor score should be a trigger to look at shopper issues before you invest further.

If your brand is showing up well, then getting more people in is a no-brainer. Discounting is, however, not the answer. Discounting decreases loyalty, since customers become used to the fact that as cheaper price is just round the corner, so promotion uplifts decrease. The normal response to this, deeper discounts, simply makes the issue worse. Moreover, the discount motivated shopper cruises from one offer to another. So reducing the CPS score as the playing field levels.

Typically you will need some discounting alongside  shopper marketing support activities carried out in your core areas, revolving around your core customers, and what they see when they reach the core stores that supply them. Promotions give you volume, shopper marketing gives you growth.

Invest behind your best performing products to get the best long term ROI

There are a number of very accessible non-discount promotion techniques that also work very well, that are a must to understand. I do run workshops looking at these. 

Increase your distribution in your core areas, around the stores, and to the shoppers most responsive. These stores need more stock and space, more signage and advertising to reach the easy to covert local population. RetailVitalStatistics insights tell you exactly where these key stores, and areas, are, and Core2Store, our sister company can implement new stores and increased promotion sales in these areas at positive ROI.

It is routine to get 30/1 ROI from activity supporting brands with a high CPS score, and tightly targeted objectives.

If your activity is not giving you this, is that the fault of the product, bleeding away triallists as fast as you put them on? Straight back here to Marketing Development, and put your investment behind better products. Or is it the fault of the type of activity you have selected to use.  If you are building brands remember to invest in layers around your core stores, and multiply the impact. 

If you don’t know what your ROI is, then it might be a great idea to keep your cv up to date. Some time in the near future it will come in handy. The pressure is on  for measurement, and, as they say in the law, ignorance is not an excuse.

Contact colin@storecheck.co.uk if you want a range of FREE views on how you can do better with Tesco giving positive ROI and growth all round.

Unexpected item in the bagging area dies screaming – but it’s not alone!

Tesco has announced that it is introducing a new audio voice to its self-service and scan as you shop checkouts, with the ‘unexpected item in the bagging area’ alert also becoming a thing of the past.

Following feedback from customers which described the previous voice as ‘shouty’, ‘irritating’ and putting them under pressure, the retailer said the new voice will be “friendlier, more helpful and less talkative”.

It said six ‘unhelpful’ phrases including ‘unexpected item in the bagging area’ and ‘please take your items’ have been removed, while ‘thank you for shopping at Tesco’ has been added.

It seems quite amazing that Tesco have installed 12,000 self-service checkouts, since they were first introduced in 2003. Feedback from the US showed that this was a part of the reason this initiative failed.

Of course, here in the UK we will put up with anything I guess.

Or perhaps we won’t, which is why there is a sudden interest in what shoppers like, and the fact that they have been unhappy for years with other simple, and easy to fix things such as offers and core products always being out of stock, as you can see on this site.

Of course, not having listened for years, and getting your trade body to gloss over the tacky availability bits does mean that when people do vote with their feet you panic.

The latest Position with Tesco Change

The mass reduction in Tesco ranging is now in full swing, and many products are on their on the way out with many areas cutting their sku count by half.

Shopper Response – or Supply Chain necessity

The reduced sku count is replaced by additional facings, and – Hallelujah – they are saying that they will always have 40% of a weeks demand on the shelf. Of course, for many brands this is unnecessary overkill if their facings have been increased in proportion to the drop in offered variety.

In general, the faster moving the product the greater the need for high stock cover since you are covering the increased risk of a product going out of stock in any one day. You also need more stock for products that are very price sensitive, examples being in the BWS area. But this also applies to snacks, and the “general rule” will shortchange some here.

In general there is no general rule, and this particular one, if applied across the board, demonstrates a clear understanding of the shortcomings of the current just in time delivery system, but with a fix that is crowbar, not scalpel.

As for shopper response, well the other side to availability is having the right products in the right place. No point in supplying jellied eels to Merthry Tydfil, or lava bread to West Ham. But in general terms that is the current plan.

Moreover, if you, as a shopper, should complain that your favourite product is no longer available, you will be offered a coupon for an alternative.

Now I have no objection to coupons. In fact they are an incentive that is currently under-used by brands (and over-used by Tesco Club Card!).

However, for a significant percentage of people only the product they wanted will do. We have a case study of a cat food – ultima – No 3 brand in Europe but in low distribution over here. They were kicked out of Tesco (the Sales Director says because they were overbid by the competition for back money). 3 weeks later, their sales in Wilkinson nearly doubled, and stayed up. They are now arguably the major dried cat food stocked there. These are facts.

One of the reasons given at the time by dunnhumby was that loyalty to the brand was low…..

This is, sadly, another instance where Tesco are taking strategic decisions without understanding the downside.

Getting the supply chain right is not just about getting any old product there, it’s about getting the right product there. The larger the store the more important the decision is. Of course, in the past, listing decisions were taken off the back of a wallet. So if big brands are bearing the brunt of the downsizing, I may be forced to eat my words. BUT

I have a crisp £5 note that says this will make very little difference to the current Tesco decline. If you need to grow turnover per square foot and you are cutting back ranging by 20% it is perverse to feel that out of stocks will fill the gap.

 

The two speed convenience market

Taken as a whole, the convenience market is in very rude health…

Him! tracking research revealed that the average spend in this channel increase from £6.05 last year to £6.52 this year against a background of price stability, combined with an average of products purchased that has hit 3 for the first time in 10 years.UK convenience market

Some store groups are really committed to expansion – The Coop has pledged to open 100 in 2015 despite its torrid recent financial past. M&S(38.1%), Sainsbury Local(14.9%) and Little Waitrose(13.3%) as the upmarket offerings all growing by over 10%.

But there are exceptions

However Tesco and Morrison are exceptions, with Tesco, the largest chain at 2,347 seeming to be peaking, as it has announce the closure of 43 underperforming Expresses. This despite also announcing that the two Golden Children were online and Express at the end of last year.

Morrison admitted they were “not seeing the level of performance”

Meanwhile Musgrave have sold out their loss making UK convenience brands, Budgen and Londis.

What is associated with success?

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Food Doctor in a non ranged Tesco heavily shopped in early afternoon

Him! note that c-store shoppers are buying more on promotion – but still not as many as in the supermarkets – only 20% of the basket. However, the increase in basket size shows that people are looking at more areas than ever before. The increase seems to be due to a percentage of shoppers buying over 5 units, rather than a wholesale move up. The number of shoppers buying just one item has moved not at all with an average of 30%.

However, the number of people buying on impulse is up to 20% from just 17% in 2014, and 6% in 2000.

It’s Promotions Jim, but not as we know it…

When you set up a convenience store it’s all about location, location, location.

It’s exactly the same inside the store. Retailers need to know what products their customers would like, and then make it really easy for them to be seen. We carried out research with a major confectionery company, and this showed that the further away you were from line of site at the till, the less effective your POP display was. On the other hand, POP on the way in, and in particular, outside the store was effective.

Path to purchase also works well here. Him! also reported that one in 5 shoppers received leaflets from their local retailers, and a massive 62% of them said they encourage them to visit the stores.

You would think, if you listened to all the commentators, that it was all about price. To an extent, it is, however, 37% of people bought an unintended item, the remainder switched between product or brand.

Key locations for convenience stores are the checkout queue, the path to purchase for signage and home based
couponing. Getting people to move outside this can be very challenging.  Here you might think that a standard MGMO freears display layout is just what you need. However, times are changing and more and more city centre people are into Healthy Eating. This is a phenomenon we call Urban Health.

Increasingly for lunch people are choosing healthier snacks that don’t give them the sugar rush. The picture heading this article is of a heavily shopped checkout fixture for Food Doctor, one of our clients. The snack bars at the top are down to a token few, and most of the full bay has been very heavily shopped. However, this store was not ranged by Tesco for this product. With confectionery purchases according to Him! in a rapid downward spiral (27% to 19%) this should be a wakeup call for convenience stores to look outside of the main sugar brands to healthy alternatives. This is a huge growth area that is under-recognised at the moment on the High Street. RVS are working with a number of brands challenging the unhealthy in an area that is great for store PR and sales equally.

It’s not all about Price

RamadanMost c-stores have absolutely no idea what sales they expect to get from a promotion. However, if you, as I do, move from store to store you rapidly get the picture that promotion prices empty shelves. Given that 37% of people added a product to the basket because of a discount, it makes sense to over face special offers dramatically from day 1. The promotion space is the most important that stores have, and it should face the shopper as dramatically as possible. This is a Ramadan end for a local Tesco store facing the entrance. Light on Ramadan messaging, but very heavy indeed on what matters to Ramadan shoppers.

Increasingly, too, companies are realising the benefits of stopping shoppers with non-price initiatives. Branding is becoming really important to c-stores. Coupons are one way that brands and retailers can work together by offering the opportunity to bring people in.

Other ways would be to link sales of destination product through to other product. This is something that, as an example, WH Smiths do when they offer you product at a discount with every purchase.

Great idea, that would be even better if the two together were tied at the shelf (buy this, and this and get a discount or your money back).

Display, as well, is paramount, in building high visibility product. RVS identify core shopper needs in areas, and these should be to the front of any offering. Since shopper in convenience do act on autopilot it is vital to ensure that any messaging is as “in their face as possible”.

Core2Store have trialled various approaches to build that additional sale when you know there is a real compatibility between two products.

Position your core products right at the front (but do make sure you understand what they are first!)

Position POP around them

Position bags (or cartons or cans) of stock so they can’t miss the message, and can’t avoid buying

Lastly

Bring them in with a message in mind

Move your two speed shoppers up a gear by spending time understanding them

 

 

 

 

 

 

Profit from change before change removes your profits – the Sales Challenge

The UK retail environment is currently undergoing violent change. This is in part driven by a change in attitude and circumstances of the shoppers – but also by a lack of response of the key retailers to this change.

This blog is about how you can turn the current position to your advantage.

Cull your range – and improve your sales at the same time

Tesco are already planning to remove products they don’t feel are worth their space on the shelf. To be fair there is a very long tail of low performing products clogging the shelves, and using space that could be better utilised as flexible space for offers or as additional fixed space for the best performers  makes absolute sense. Shoppers have really complained in the past about Tesco availability – in particular during promotions. So full marks for picking this up.

Tesco/Sainsbury/Asda have a tail. But so do you. The knee jerk reflex in the past has always been to build range to gain additional sales. This will be much less of an option in the future unless you can make a very strong case – and back this case up with more money. Make no mistake, all the retailers will increase the listing cost for new products to reflect the higher value they now place on every foot of shelf. Profit Matrix 1

The RVS profit matrix chart gives you exactly what you need to understand how the retailers, and your shoppers, see your products. The green blobs are products that do better than your shelf average return. The Y (left) axis, shows the return you get from space overall. While the X axis shows how well they do in smaller stores. The size of the blob indicates the number of stores the product is in.

This chart offers some really obvious opportunities, to go with the space return issues. Simply trade places on the shelves with your poor performers to meet both of your objectives. Promote change NOW before the change is implemented for you.

Make sure new products get on their feet immediately

shelf adder and stickerIt is quite usual for new products to go on the shelf with a discount. However, anyone familiar with the profile of promotion performance will be fully aware that this is just like a Chinese meal. A few hours later you need another one.

However, if you spend a little more you can get seriously better results. Retailers tend to treat all of their customers as a homogeneous mass. You,. however, don’t have to.  The “Try me free” stickers are very powerful in recruiting new people who will come back. Of real interest to you is that you can get the same uplift as an 80p drop in price for a reward cost of less than 1p. The stickers link directly to our yousay site which rewards the purchaser and gives you instant feedback. Meanwhile the Shelf Adder®” on the front is absolutely ideal as an alternative to the shelf strip in the channel. Apart from anything else, you can actually see something, as opposed to price labels! However, it is also there to hold your space and let the night shift know what should be in place.

Close to the product (Layer 1 investment) is the most powerful way you can spend to build loyalty and instigate change. You still need discounts for volume BUT you need growth above all.

Horses for Courses

shutterstock_219381586Every product has stores in areas where more people than the average seek to buy. People of like mind tend to live together, their children go to the same schools, and they shop in the same range of stores. In short, we tend to behave just like our friends. So when we visit our local store, the average shelf space will be wrong when the product filling it is in more demand than the average.

Build your Core

If you can identify these core stores, (RVS Pulse provides you with a complete list of each of these) then you can invest a little more with larger shelf adders geared to giving you a little more space. These can be placed after discussion with store management.. It is typical for companies – if they focus at all – to choose just the large stores. Actually, if they are not core, they usually have more than enough stock cover and space to manage standard demand. So whatever the size of the store, it it is core, work with it.

Some managers may look at the figures and say “lets work with the poor performers and bring them up to speed”. Wrong. Poor performers have many fewer of your target market passing the shelf. Catching their eye will get you a muup[lift from promotionsch smaller reward than working with your core, if indeed you manage to convert anyone at all. If you are in Sales, ask your Marketing colleague why they target their money at specific high potential and not at low potential areas. It’s the same calculation.

Store managers in your core are important. Build sales by investing behind them, and they look like superstars to their area management. Core2Store have developed a full range of shopper targeted techniques that offer you guaranteed store based growth based on PULSE data that you, and the managers you talk to, can depend on. And make sure these core stores understand that they need to allocate much more space as soon as you go on promotion. The uplift they will give you makes them vital for your sales, and for your core shopper happiness (see the next section). Whatever you do though, do not rely on field calls to give you this rapport. Field teams, no matter how good they may be always have variable quality in front of your managers. Talk to Core2Store about how they received this accolade without any field team usage at all;

I have been at a Local Sourcing Conference today where we received an award for ‘Understanding the Tesco Strategy, Category Strategy and Local requirements’ and ‘Working 24/7 to drive growth’.
This is a really positive acknowledgment from the Tesco Local team and its thanks to all the hard work you put in that is helping our business move forward in Tesco.

Check your Stock

Those amongst us with long memories will understand the concept of stock pressure! Managers will always seek to get rid of stock hanging around in the back. The problem for them, and for you, is the way that retailers manage stock at the moment, leaves too little in any of your core stores normally (out of stock at key demand periods) and in particular when you are on promotion.

There is a direct relationship between stock promotion upliftthe stock cover you have in a store, and the uplift possible when demand increases.

This may be organic (such as at weekends) or artificial, such as promotionally via price, couponing or advertising.

Store support needs to be proportionate to shopper demand, and not store size if you want to get sustainable growth from satisfied shoppers.

Raise your sights by looking at more stores

It is becoming increasingly important to give stores and their shoppers what they need, rather than what they say they want. Central systems have lead to local problems. Moreover, the habit of retailers to allocate products to convenience retailers simply on the basis that it sold well in large stores is perverse. We have brands where they only sell in smaller stores simply because they appeal to the impulse purchaser. It will surprise many Sales Directors, I am sure, but the 2,500 Tesco Express stores have the potential to sell a third, or better, than the sales in the larger stores – in particular in core areas. If you have the right product then, that’s equivalent to 800 large stores. That’s bigger than all Tesco Extra and Supermarkets put together. And, of course, convenience stores are growing. Not just vs their larger competitors, but organically. Have a look at this;

him! has just interviewed 20,000 shoppers, across 20 leading convenience chains, as part of its Convenience Tracking Programme (CTP) and found 18% of them admitted to picking up something on impulse vs just 15% in 2014 and 14% in 2013.

“Interrupting shopping behaviour in a convenience store is no easy task; 3-in-4 shoppers want to get in and out as quickly as possible and 42% don’t notice any comms or signage in-store. But retailers and suppliers have been putting a real focus on ‘interrupting and inspiring’ their shoppers in-store in order to disrupt this shopper often on auto-pilot,” suggested Katie Littler, Communications Director at him!

The number one driver of impulse purchasing is promotions, according to shoppers. “But it’s not just the cost saving which tempts shoppers,” explained Littler. “The focus and visibility given to promotional products help the get noticed by shoppers.”

The other area which is driving impulse purchasing is the till and queue area. 1-in-10 impulse shoppers pick up the product from this area of store, according to the 2015 CTP research.

The way to get into the smaller stores is to prove how well you can do there. Seem impossible? Not so.

Commit to Change

Many companies are keen to do more of what they already do, but negotiate the price down. You need to ask yourself if what you are doing at the moment is actually taking you where you need to go. If it isn’t or you don’t know, this is a Green Shield moment for you.

Back in the day, Green Shield stamps were offered everywhere – but the biggest giver by far was Tesco. It was commonly felt that it would be suicide to pull out. This is the Wikipedia comment

In 1977 Tesco launched Operation Checkout, price-cutting aimed at countering the new discounters such as Kwik Save. A decision was made to abandon Green Shield stamps, saving £20m a year and helping to finance price reductions.

Recognise the scenario, and want to bet against dunnhumby being bought out? Nothing wrong with the Club Card, except when you call it a loyalty card. It’s not. And if you can’t target your competitors, it has no value for you either. Remember, a pack based promotion does target your competitors. Shoppers who are lapsed users became so for a reason. There is a direct relationship between more purchasers and more loyalists. Target always getting more purchasers and you get the loyalists as a bonus.

Thing is, if you invest to your core, and you know where it is, you can measure the impact via the sales data you get for free from all the majors. If you don’t see the impact, you aren’t getting any. If you don’t measure, you can’t do better.

“If you don’t know where you’re going, any road’ll take you there”

This quote loosely from Alice in Wonderland should be placed on the wall. The data exists (and PULSE from RVS makes it readily available) to understand where you are, and plot a measured course ahead.

This can then be shared with retailers at all levels, as well as within the company so that all activity is directed, supports, and is measured together.

Keep your fingers on the PULSE of your business

 

Sainsbury Management – White Knights or White Elephants

Sainsbury’s has reported a pre-tax loss of £72m for the 52 weeks to 14 March, the retailer’s first loss in ten years.

A Fish running out of Water

A Big Fish running out of Water

While property writedowns accounted for the bulk of the retailer’s losses, like-for-like sales (excl fuel) were down 1.9% as competition from discount retailers Aldi and Lidl continued to hit margins.

The retailer opened 98 convenience stores during the year and recently announced that it will be opening two digital hubs in London and Coventry.

Sainsbury’s chief executive Mike Coupe said: “The UK marketplace is changing faster than at any time in the past 30 years which has impacted our profits, like-for-like sales and market share.

“However, we are making good progress with our strategy, and our investment in price and quality is showing encouraging early signs of volume and transaction growth.”

What do they say they will do?

They have announced a sspog initiative that will put more product where it is needed. Tesco, of course, have had this for a while. However, it has not prevented the often horrendous out of stock they have started to address by putting more people in place to move the product, and reducing the number of lines.

Mike Coupe has, however, ruled out this kind of range reduction (but never say never). At a stroke, therefore, ensuring that the best he can do in any particular store, is tinker round the edges.

They will be increasing their ranging of Tu clothing, against a background of real competition in fashion online and by specialists who offer a large range just down the road. As well as concessions with retailers such as Jessops, who have already failed once on the High St. Pass me the wallpaper, adhesive and crack filler please.

Will this be enough?

Personally, I doubt it. Sainsbury data initiatives have a history of being clunky and very very late. Their on line store by store data – the Big Button, variously arriving on a Tuesday, any time in the week, or, indeed, not at all on occasions, is by far the least user friendly of the majors. If you don’t get it one week, it is gone forever.

For many years they have been flagging intention to change, and discouraging brands from accessing it.

Sainsbury don’t tell you which stores you are ranged in. It’s a secret. The only way you can find out is to track where the initial allocation goes, for which, of course, you need store by store data from Big Button.

Data is either a good thing – or a bad thing. Make your mind up time.

A recent off sale initiative they launched, CAM, is intended to focus on products that are there – but not selling. However, as a manager commented to me, “if you can’t measure it, and you can’t bonus for it, how well do you expect it to be implemented?”

Of course, Sainsbury are renowned for top down management, and resisting all attempts to get feedback from the base. So the comment I just passed on would quite possibly get someone fired. If you, as a brand owner, go into any store to ask any question of a manager you will find yourself referred to a faceless central person for comment.

All of which bespeaks a retailer absolutely confident  that no form of external, informed, comment or suggestion would, in any way, improve the way they approach their customers, and their business.

What would help?

For a start they need to have an internally generated set of standards that everyone is signed up to.

In the Dear Colleague for the 6th May Mike Coupe comments “….we’ve had a really encouraging start. We had a good Easter, and sales of Easter Eggs were strong. We  also managed to retain great availability long after our competitors”.

How much better would this have been if he had said “But we recognise that is not good enough for our valuecustomers, so together – and with a new supply chain initiative –  we aim to do much better next year”.

This year, yet again, out of stock on Eggs hit the nationals.

You need to have a set of values customers and colleagues sign up to, that offer a better experience than anywhere else. Here you need a clear view on how unacceptable the lack of any one product – in particular on offer – is to your core.

Given that 40% or more product is sold at a discount – but typically only 20% of space is flexed (and often only if you pay for it) the tinkering round the edges approach may unravel without local range reduction (not necessarily national).

A very simple example. In a local mid sized Sainsbury they have a KTP canned tomato in the ethnic aisle selling at 10p less than the Sainsbury own brand around 5 steps away. In turn this is selling for significantly less than some Napolina varieties on the same shelves. That’s 3 products. Take out the own brand, have the ethnic ranged in two areas and you still cover the market. And, with Ramadan coming on, you increase the likelihood of making the bulk sales that are common. Given the ethnic nature of this area, that is a ranging change that would increase availability, without impacting in any way on choice.

Silo and top down ranging impacts on the discounters much less. Reduced ranging lessens the burdens on buyers, so they can oversee a much wider area. Supply chain is much less complicated.

If Sainsbury want to make a difference for their customers they need to shake up their ranging in a much more fundamental way than they have just announced.

Oh, and encouraging well meant feedback from down the line and external commentators would be a good start.

So recognising, as Tesco do, that once in a while, their managers might be able to make a difference at store level requires simply that you trust them. And of course, establish that all important shared set of shopper-based values.

Shopper Management = Category Management evolved

It is a shame that people don’t behave in ways that systems would like them to. But they don’t. It is also a shame that systems developed back in the day when things were simpler, are not always fit for purpose when times change. But they aren’t. The typical ranging, developed in the era of large store dominance, went something like this;

1. We’ll try the product in our largest stores AND THEN

2. If the product performs well we’ll move it down to our smaller ones

3. And so on

In the days when the smallest stores were owned by other people than the majors this worked well. As time moved on people stopped shopping in many of the small stores – and moved into shopping in the big ones.  At that time I was involved in many conversations which went “How on earth are we going to get trial of our convenience offerings when there are no convenience stores around”.

This was a very good question. Many grocery brands have been built on trial in other shopper channels. Walkers in the independents are a good example. Growing from Leicester through the Midlands, to the North in chunks, taking out Golden Wonder as they went. J2O first started in the on trade, and moved into the multiples when they had achieved all they could there. Other brands rolled out from doorstep delivery including Frijj flavoured milk. I still very vaguely remember Corona dedicated doorstep deliveries. Local people to people experience is great for getting early trial where serried ranks of product on artificial category shelves lacks cut through.

Roots of Loyalty

Roots of Loyalty

Let’s move on 10 years. Here growth is coming from small scale again or even – in the case of dotcom – one to one. So people can build their own “shopper category”. In fact all the main retailers already build a shopping basket for you. However, ranging into small stores by the majors still tends to be decided in exactly the same way as above.

Meanwhile people, accustomed to a smoothed path to what they want, have turned to retailers expert at managing great value short range product – the discounters. You know what you get, and it is main shop volumes but with shorter ranges.

Convenience stores, where, as an example, dunnhumby data is seriously lacking (low club card usage) suffer accordingly.

You have to ask yourself why club card data is lacking here. I have not heard that this is something Tesco have looked at. But here’s a stab in the dark. Club card carriers in the family don’t shop in convenience stores.- but other members of the family might.

The Shopper Marketers Dilemma

When you are involved in shopper marketing you know that the shopper has missions. You absolutely know that if you make these missions easier they will buy more, and like you better. That is, though, not the ethos of the large store. The large store wants to keep you there so you buy more. They want you to browse the aisle, not run down it.

Category people think in big store terms, they see shopping as top down layered systems that need to be maintained. Shopper marketing people think in terms that fly in the face of some of these approaches. They think about making a mission easier to manage so additional time spent is because people are shopping, not simply confused.

This is the dilemma. Retailers and Sales teams are wedded to maintaining the big store system. This has no room for regional differences. Until recently the Coop, proud supporter of Fairtrade and locally sourced produce dictated that there would be no local ranging of any description. I gather the impetus for this was the lucrative central contracts with the major brands signing up to interesting overriders. Something of a volte face for a brand built on the back of individual local societies.

I spoke to the marketing side of another major convenience chain and I was told that, under no circumstances to raise the issue of local ranging.

However, local ranging is important to people, and this often cuts right across the way that top down works, driving from the “bottom up”.  Just like in the “old” days.

This is where different shopping missions offers the chance for the convenience store, whether independent or multiple, to respond best to local needs which have nothing to do with categories, but everything to do with people.

I’m going to tell you a story

Peer pressure par excellence

Peer pressure par excellence

I went out of the house yesterday, and my next door neighbour, a man who is showing significant signs of multiple business lunches, came out of the house in brand new trainers and sweats, pressing the key to open his car door. “Hi” I said “Taking more care of your body”. “Exactly”. “Off to the gym”. “Not right at this moment” he said “Hows the diet going then” I asked, “Still choosing one” he replied. “Oh, then your new approach is all about wearing sweats and trainers to walk to the car?”. “I’m breaking my body in gently” he told me.

There is a lot of pressure on companies to promote healthy eating – and employees to address it – as a vital part of a healthier lifestyle.

Urban Health

One of a number of new local segments is people who are into health where they commute. Their meals at home may well be dictated by the family (variations around fish fingers). But when they are with their colleagues they choose to go with easy health options that they buy in and around their local convenience stores. The products may not be healthy per se BUT they are a healthier choice for desk snacking and on the go lunches.

This is, as with the sweats and trainers, in part to do with peer approval. But of course there has been a huge amount of publicity around the importance of low GI and avoiding the high bursts of energy that you get, as an example, from Mars Bars and other sugar and chocolate confectionery.

New product entrants to the market come in rapidly, but make their way very slowly down the chains. You don’t see High Protein Bars, and one of our clients, the Food Doctor only acquired a very high penetration in the face of central diktat, and not because of. Other clients have 30% of their ranging opted for by retail managers. This ranging is a benefit to stores AND brands since products that overperform by 30% or more (a necessary criteria) their market share, actually build a bigger “category” as they become very important to local shoppers.

So the Urban Health sector attitude to Finer Foods is very well removed from people buying full fat-with-added-chocolate-and-loads-of-sugar yoghurt.  Look instead for 0% fat with add-your-own-fruit. This is a chance to build from the shopper up.

The Urban Health sector is growing fast. For a guide, the free from sector alone is forecast to grow to £550 million in 2014 – that’s up from £365 million in 2014. Then have a look in Holland and Barrett and check the serried ranks of the high protein products. H&B say they are “bidding to become the UK’s biggest seller of free-from products”. All this from predominantly high street outlets. Greggs have also just announced a new “healthy” range for similar reasons, alongside further record results and an interim dividend to their delighted shareholders. So much for the death of the High Street.

Contrast this with the offering in your local big retailer convenience store.

A Change for the Better

I’m not advocating replacing category management with something else. What I am doing, though, is saying that the name is redolent of a past that has got us where we are. Out of touch.

So lets call it what it should be, shopper (demand) management. And lets look at convenience stores as a hot bed of new ideas. Not a dumping ground for centrally negotiated national contracts.

This way you get loyalty from satisfaction.

This way, too, you don’t need a reward card. In fact you don’t want one. What you need is to look at what will sell in the future, not what might have sold somewhere else, yesterday.

 About Us

We identify where win/win/win Shopper, Store and Brand opportunity exists.  In partnership with the British Population Survey, we also work to identify media and content to reach all sides of these core areas. We work in particular with high growth, high interest brand areas such as health an ethnic.

Check us out here

The Wicked Which? of the West strikes retailers – and brands – together

 

Supermarket Pricing and Brand Promotions – Playing Dirty or Legitimate Business Practice

This week Which? announced it would lodge a super-complaint with the Competition and Markets Authority (CMA) over ‘Misleading’ Supermarket Pricing Practices. .

Which? point out that over the years they have highlighted a range of what it describes as misleading and confusing pricing tactics in supermarkets – like “dodgy multi-buys, shrinking products and baffling sales offers” – that exaggerate diPhoto: Amy Shepherdscounts.

It said many retailers are creating the illusion of savings that don’t exist and are manipulating consumer spending by misleading people into choosing products they may not have chosen if they knew the full facts.

We have been here before

Get your Head round it

Hard to get your head round

The pricing practices of concern that Which? has identified are confusing and misleading special offers; a lack of easily comparable prices because of the way unit pricing is being done; and shrinking pack sizes without any corresponding price reduction. In addition, it says that supermarket price match schemes for a basket of goods may also make price comparisons more difficult, as the range and types of products on offer can make accurate price matching impossible to achieve.

Which said that the cumulative impact of all these different pricing tactics means it is virtually impossible for people to know if they are getting a fair deal, particularly when prices vary frequently, consumers are in a hurry or are buying numerous low value items. 

Using legal powers under the Enterprise Act 2002, Which? has made the first ever super-complaint against the grocery sector to the CMA, urging it to take action. Once Which? has submitted its evidence to the CMA, the regulator has 90 days to respond. As a first step the CMA may request a market study, in which it could demand further information from the supermarkets, before escalating to a full-blown investigation.

This is, in fact, by no means a new issue raised by Which?. In fact it goes right back to the last full OFT enquiry that I was involved with as Head of Insight for the (then) Institute of Promotion Marketing. At that time the OFT issued guidelines, and the major UK supermarkets agreed in 2012 (reported by the BBC) to adopt a set of principles drawn up by the OFT. They were Tesco, Sainsbury’s, Morrisons, Waitrose, Marks and Spencer, Aldi, the Co-op and Lidl. Asda, which had not yet signed up, said it was considering the revised code. Simple things such as not having the offer period longer than the comparison period bothered them.

Other things bothered me at the time of greater concern to brands and promoters

The first was the fact that the major retailers still only saw each other as competition – so their price comparisons were not against market pricing, but against a wholly artificial construct – the Tesco price in the main. This remains the case, so Sainsbury, who now use Asda  as their benchmark, offer coupons for a gap that is impossible for the average shopper to know about. Given that the fastest movers are from Sainsbury to the discounters, and that Asda is not a natural home for the Sainsbury customer (geo)demographically this all seems very puzzling. For brands, however, this issue lead to a plethora of sizes, and the additional costs the this leads to, just to get around the straight price comparisons, that were used to force prices inexorably, and unaffordably down. 

For the shopper, who sees the competitive set as much wider, Sainsbury must start to look increasingly out of touch.

Heads they win – Tails you lose

Secondly was the way that Tesco, in particular played fast and loose with coupons, as the major distributor, and recipient in the UK. With their market size they said – we will redeem your coupons, we will take the money straight from your trading account, and we will charge you for handling. Meanwhile most of the competitors were quite happy to see a coupon as money that they could put through the till against anything in the basket. Possibly the worst examples of this were the Tesco self scan checkouts. Here all you needed to do was scan an original and put any old piece of paper into the slot. I know, I did it myself (but advised the client accordingly).

The key retailer has a position that goes; You should always use our promotion techniques no matter how poor the result simply because we make a great deal of money from it. Frankly, if it did make money for the brand it would bu up-priced so it didn’t OR you would be prevented from using it (as in dunnhumby preventing you from couponing users of competitive products)

Quis custodiet ipsos custodes?

When you can set your own comparisons and manage and report on the way you have handled other peoples money confusion and the potential for serious misuse is built in up and down the line. Not just in the areas that Which? will focus on. 

Brands, of course, lose every time.With GSCOP, saving the presence of the ombudsman, being the last resort of the desperate man. We have a client issue where a major retailer said “You will only use our in-house techniques as part of the listing process”. The in store sampling (very expensive, poorly managed), the coupon process (impossible to easily track, and given that in the case of Tesco you don’t know where they went, and where they came back) quite impossible to assess. Then when these failed to work, the challenge, fix or you are out. The fix went in, a non-price promotion technique, and was really successful  It met the criteria laid down comfortably, but the product was de-listed anyway. A clear case of an appeal to GSCOP since more time should have been given. Will this happen dear reader – I invite you to draw your own conclusion. 

Retailers need competition to temper their excesses

It is very hard to legislate for appropriate price promotions, since most could be defended strongly where they are properly used. In fact most retailers do actively set out to confuse the shopper. This they do in a wide variety of ways, changing store layouts, confusing offer statements, offer ticket forests on the shelf, own brand ranging at key shelf places etc. There are sound business reasons for this. Most shoppers do not vary from their walk, and breaking their habit pattern can deliver more sales. It does, mainly though, develop hostility. 

Up to now key retailers have managed to get away with it. From now on it they need to consider service as well as their product offer. 

Which? needs to apply common sense, and target their complaints much better

Brands have little leeway. In an era where costs rise inexorably, the shopper has become used to price stability, even often presented as price reductions. Which? suggest that they want to address pack reductions without a corresponding price reduction.

You would like to ask Which? the planet they come from. Why on earth should a new smaller size pack not be priced wherever the manufacturer or the retailer want to price it. Currently pack changes are the only way that many manufacturers have of delivering what they perceive shoppers want, and retailers tell them they must achieve. The same margin (or better) at the same price as last year, when costs overall have increased.

Where to from here. The issue that brands have is that their promotion horizons tend to be limited to the one’s that the retailers offer. Moreover, Sales Departments accept that they do not measure the value of the investment they make through this. Asking dunnhumby to measure the impact of the coupons they have just sold you is not likely to give “you have been wasting your time”..

Brands need to seriously explore other, non retailer sponsored, ways of growing the brand. Discounters are growing fast, and geo-demographic promotions to your core will build brand sales across outlets. Add to this real efforts to maximise distribution in your core areas and you can begin to build growth to your shoppers, wherever they go.

Which Say

Executive Director, Richard Lloyd, said: “Despite Which? repeatedly exposing misleading and confusing pricing tactics, and calling for voluntary change by the retailers, these dodgy offers remain on numerous supermarket shelves. Shoppers think they’re getting a bargain but in reality it’s impossible for any consumer to know if they’re genuinely getting a fair deal. So shoppers are voting with their feet to places where they can get a fair deal – at least on a level they understand. 

I say

Brands may think they’re getting a bargain from retailer promotions but in reality it’s impossible for any of them to know if they’re genuinely getting a fair deal. Change your policy and invest behind the brand, not the retailer, for a change in your fortunes. Stick with your existing investment, and anticipate no change in your fortunes.

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