Despite the supermarket price wars and intensive price-based promotions on more than 50% of FMCG products the average shopper saves just £1.56 per week. But, according to a detailed analysis by IRI the cost of funding shopper savings costs supermarkets £1.5bn annually. Based on real sales data collected across all major UK supermarkets, IRI believe this is the strongest indicator available that the price war is having no significant impact on shopping behaviour.
Price is not a sweetener
Tim Eales, Strategic Insight Director at IRI, commented: “The price war only saves shoppers the cost of 2kg of granulated sugar. This is unlikely to make a significant impact on their weekly budgets. At the same time there is no evidence that they are helping the supermarkets on their paths to growth. Instead they are hastening sales declines, squeezing profits and potentially breaking the loyalty bond with consumers that they have worked hard to build.
“Continuing the downward spiral of price promotions is unlikely to keep shoppers loyal to a single store and makes them more price-sensitive than they were previously. Unless the supermarkets think differently about pricing and promotion, they will struggle to find paths to growth during the next few years.”
This reminds me of what happened to websites a few years ago. Websites moved from focusing on heavily promoting their own products to providing more added value content. Visitors went up and sales increased. In a similar trend retailers are now shifting from pure price promotions to providing more added value content via smart promotions. This helps shoppers make the right buying decisions for them.
This move to shopper power opens up new ways of promoting products and raising average basket sizes. Have a look at this short animation to see what this means.