A new report from shopper intelligence firm IRI has highlighted the failure of promotions to boost sales volumes. The Europe wide analysis into the pricing and promotion of FMCG goods reveals that as consumers continue to cut back on perceived non-essential items, volume sales have started to decline despite retailers’ focus on deals.
The amount of food and non-food goods sold on promotion was up by 2.7% in the last year, continuing a period of promotional intensity for many countries in Europe. However, the report’s findings show that overall volume sales fell by 0.1% across Europe as squeezed consumers cut back on perceived non-essential categories.
The personal care category was found to have the biggest year on year increase in promotions, up 7%, with the household category up by 4.4%. The average across all categories was 2.7% with non-food up 4.9% overall. However, personal care and household were the only two categories surveyed where both sales volume and value are falling.
Tim Eales, Strategic Insight Director at IRI, suggests that promotions have reached a tipping point: “The UK, which has traditionally had the highest level of trade promotions in Europe, is showing signs of a decline in promotional intensity. FMCG manufacturers may be losing patience with expensive trade promotions that are not bringing the volume rewards they use to. Promotions have helped shoppers meet the rising cost of their grocery shopping baskets, but they eventually become used to them. After a while their loyalty towards brands and stores erodes which makes it difficult to raise prices in the future.”
The report states that food and non-food promotions are not working in the way they used to, and manufacturers are reacting by reassessing their trade promotion strategies to regain some of their margin. 2013 will continue to be a challenging year for FMCG manufacturers and retailers but IRI concludes that new paths for growth can be identified ‘if the two sides work closely together to define specific merchandising strategies for online shoppers with tactics to create impulse purchasing’.
Consumers continue to be the ones in control, with more shoppers using a price comparison site to find the best value basket, becoming less loyal to specific brands and retailers in the process. As households have adapted to shopping in tough times, shoppers have become promotion weary – with price becoming the key motivator, putting increasing pressure on retailers.
Monitoring the competition for grocery retailers is therefore increasingly vital – both to understand competitor prices and promotions, as well as to get insights into a competitor’s product assortment. Find out how three out of the top five UK supermarkets with an e-commerce presence are working with Profitero to ensure they are attracting shoppers with the best value prices to drive sales. Contact us at email@example.com.
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Pricing intelligence company Profitero provides retailers with actionable price intelligence data, monitoring over 50 million products across 4,000 eCommerce retailers every day, observing pricing, promotions and stock availability. We work with the world’s leading retailers, enabling them to acquire new customers and grow profit margins by monitoring and responding to changes in competitor pricing and promotional activity as they happen. For more information on Profitero price intelligence and competitor monitoring, visit www.profitero.com or email firstname.lastname@example.org