Promotions Failing To Ignite Sales For Retailers - IRI

Given that IRI's research re effectiveness of promotions shows that reality does not match expectation when it comes to sales, this study of over 85,000 promotions in UK supermarkets, convenience stores and health and beauty outlets raises the following issues for NAMs:

• Where at: Essentially, vital to examine your specific categories/brand performance, but it looks like any gain for retailers is via trade investment rather than margin on incremental sales
• Where headed: Eventually, more enlightened retailers will realise that specific brands appear to be growing at expense of competitors, thus in breach of basic principles of category optimisation, rather than incrementally growing the category. Short term retailers will simply grab the money
• How it affects you: Not good for building brand equity
• Action: Best to revert to fundamentals, assessing each part of the marketing mix and emphase any real advantage vs. alternatives available

Promotional Cut-backs - a reduction in Superstore appeal?

Arcadia to give online shoppers three months to pay

According to the Retail Gazette, Arcadia will offer online shoppers three months interest-free credit on online purchases.

Topshop, Dorothy Perkins, Miss Selfridge and Burton will now offer a “Buy Now, Pay Later” scheme.

Given the stresses on consumer budgets, this move will undoubtedly give the retailer access to incremental business.

The question has to be how long Arcadia will retain a competitive edge if other retailers follow suit.
Even more concerning will be the extent to which issues of loan non-performance, and retrieval of payment-default goods will lead to a degree of negative media coverage that is beyond even the levels currently enjoyed by the company…

Optimising social media?

Inflation, the next planning factor?

Given the post-Brexit fall in the pound, it follows that imported ingredients will cost more…
Add the recent BOE reduction in interest rates (0.5% to 0.25%!!), means the pound is even less attractive vs. other currencies.

Stir in the fact that UK food manufacturing costs are rising by around 10%, and you have a recipe for increased inflation, causing prices to rise in line with demand…

Except for UK retail

Already on reduced margins, major multiples cannot afford to absorb any cost increases.  Equally suppliers, having stripped out any ‘excess' costs, are unable to take any more pain... Meanwhile, the price war/s make it unlikely that shelf prices will bear any significant upward movement without loss of share.

All of this means increasing pressure on the mults, loss of market share and the growing importance of alternative routes to consumer.

For suppliers it means re-balancing their customer portfolios to reflect the new realities, secure in the knowledge that at least some of the competition will await a return to normal before being forced to change…

Amazon and the need to second-guess

From our first tentative online steps, many of us have grown comfortable in our reliance on Amazon as a simple, transparent source of anything that can be legally sold to consumers, secure in the ease of 1-click ordering, confident that the door-bell ring signals the timed arrival of exactly what was ordered, with the option of returning an impulse whim almost as easily as making a purchase, and yet again seeking 10 friends to re-bore with our enthusiasm...

Whilst the price may not have always been as low as other sources, the extra convenience more than made up for the difference...

In a similar way, Unilever's recent purchase of Dollar Shave Club awakened many of us to the possibility of buying essentials on a regular basis, in order to maintain minimum domestic stock-cover, causing some of us to ponder 'if only Amazon offered a similar service' it would not only fill a personal gap, but it would most likely blow other subscription-models out of the water...

Well, Amazon's Subscribe and Save offering could fulfil that wish...but not according to an article in the New York Times.

Essentially, building on their dynamic pricing model whereby the price you pay depends on time of ordering, supply and other variables, the resulting price fluctuations - in some cases up to 170% differences, according to NYT article - Amazon are uncharacteristically going against general consumer perception that subscription means 'same price until next year'.

Whilst Amazon give the option of cancelling/modifying the repeat order, thus meeting the letter of the 'contract' with its loyal users, the very essence of Amazon-consumer relationship is based on never having to think about the 'machinery', much less second-guess our basic assumption re the contents of the tin...

Subscribe and Save, in its present form, thus provides an opportunity for a competitor to do it better...

Tesco Same day Click & Collect makes Time the only variable?

A little over-eager response to Tesco's new same-day Click & Collect service?

Following tests that began in November 2015, Tesco’s Same-Day Click & Collect service is available in 261 Tesco stores and 36 off-site locations. Online orders before 1pm can be collected by 4pm for £2 Monday to Thursday, and £3 on Fridays and Saturdays, for orders of £40.

With other mults at various stages of similar test-mode, this is all pointing to the emergence of Time as a key Amazonian differentiator in serving shoppers...

In other words, serious online ordering and fulfilment is about matching Amazon, at least, given that having a competitive edge is supposed to means being ‘better-than’..

...which means:

- 100% availability, 24/7
- 1-Click ordering
- Returns even easier
- Delivery and Click & Collect options
- Zero-defect service
- Competitive charges

...leaving Time as the only variable (Cutting delivery/collect charges on services that already lose money becomes a race to the bottom)

Where is this heading?
As soon as retailers fully integrate online ordering and Click & Collect with their total offering, attempting to neutralise/eliminate price differentiation, then ways of optimising the time variable will be top of the agenda.

This means transferring some of the pressure back up the pipeline…

…resulting in smaller, more frequent, zero-defect deliveries that result in 100% ‘on shelf’ availability, or else…

In a price-war, every droplet helps...