The pressure on UK retailers to be more transparent in their pricing has seen the number of promotions fall to their lowest levels in 10 years, according to a new study from IRI.
The study shows that there has been a 25% 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.
As a result, UK shoppers will receive £3.7 billion less in promotional savings in 2017.
Declining Promotions
IRI says that the number of grocery lines on promotion this year has declined by 13%, resulting in an 18% fall in consumer savings through promotions compared to 2016.
“Retailers and suppliers have been under pressure to change the way they do promotions, notably from the OFT, now CMA [Competition and Markets Authority], who set out guidelines around pricing transparency a few years ago," said Tim Eales, strategic insight director 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"
Key Trends
IRI's study analysed over 300 categories in UK stores, and revealed that promotions on sports drinks, chocolate and shampoo are the most effective at creating incremental sales. Promotions in these categories are twice as effective as other categories such as salt, light bulbs, and sun care.
In general, however, levels of promotional effectiveness have risen as promotional levels have fallen, suggesting that shoppers are most likely to participate when deals are available. Manufacturers and retailers have also been investing to keep base prices as low as possible, and avoid pushing multi-buy promotions.
"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," said Eales.
Driving Growth
IRI says that there are still opportunities to optimise levels of promotion in this market.
"Retailers and suppliers should focus on analysing the impact of their promotional activity across all categories to help deliver real value and drive potential growth,” added Eales.
"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.”
© 2017 European Supermarket Magazine – your source for the latest retail news. Article by Sarah Harford. Click subscribe to sign up to ESM: The European Supermarket Magazine.
