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The Post Covid Promotional Landscape

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In an environment where financially stressed consumers are looking to save on everyday baskets, fewer better promotions may be the name of the game.

Pre-COVID, supermarket promotional frequencies were being dialed back in many markets from their high-water mark in 2015, which saw the UK for instance with 50% of sales on promotion. There had been a gradual realization by retailers and brands that price-off promotions were simply rotating shoppers around whichever brand was on special, and that multibuys were causing shopper stockpiling (and wastage in perishables) in categories lacking expandable consumption. And a sense that average weight of purchase (AWOP)-driven promotions were only relevant to larger households and dwelling types, along with creating supply chain and demand planning volatility.

During the early days of the pandemic, the rise of discounters was temporarily slowed as shoppers swung back to less frequent, bigger stock-up shopping trips. Promotional intensity continued to decline as retailer focus narrowed to availability and the challenges of keeping stock on shelf. From 2021 promotional levels had regained the level of 2019, albeit nowhere near the levels of 2015.

During 2022, as the pandemic eases, the discounters are again on the rise. Online grocery shopping has reduced from its high point, and convenience stores are again seeing commuter traffic. However, the ‘K-shaped’ recovery, where the economic effects are polarized with some better off and some worse off, has implications for promotions.

Compounding this are inflation and rising costs of living across multiple countries and in multiple sectors including grocery, driven by the energy crisis and the war in Ukraine in some markets, and natural disasters in others impacting goods supply.

As a result, less affluent and economically challenged consumers are changing to shopping at discounters and dollar stores, trading down within categories by switching into private label brands, and exploiting the promotions that exist in their regular store.  Some are researching promotions for their total shopping basket to determine their overall store choice for a given trip.

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Bang for buck is becoming more important – not just price-off, but rewards for buying in bulk. We’re no longer in a landscape where people are experimenting out of boredom, as in late 2020 and through 2021. Rather, shoppers are now buying their familiar and regular brands at the best possible value.

Retailers, meanwhile, are undertaking range rationalization programs to make supply chain and replenishment more efficient and pass on some cost savings to shoppers in the form of lower base prices. It’s not EDLP, however, as there is still a degree of promotional activity to retain shopper interest.  Some mainstream grocers are displaying cut price fruit and veg at store entrances to mimic discounters’ strategy of rolling promotional price-off on fresh categories. The grocery retailer quest to generate shopper perception of good value for money continues. 

As many retailers around the world seek to reduce promotional intensity in order to improve efficiency and recalibrate their base prices, it seems almost certain that brands as well as retailers will have to be more considered and choiceful in terms of the promotions they decide to execute. This is tricky in an environment where more shoppers may be looking to trade down and save money. But loss-leading with price-off promotions to drive traffic is neither a sustainable nor profitable solution.

What hasn’t changed is the need for mutual benefit and category growth. If what is required is a mantra of ‘fewer, better’ promotions, this places even more onus on brands to monitor the effectiveness of grocery promotions, to demonstrate not only internally that promotions have been successful from an ROI standpoint, but for retailers that they have resulted in category growth.

How can a Trade Promotion Management solution help?

In this environment, understanding the effectiveness of promotional programs becomes even more important. You don’t want to be giving dollars away, but on the other hand you don’t want to lose a sale from a financially stressed price-conscious shopper either. What’s required here is a solution such as Exceedra’s Trade Promotion Management software. This incorporates, among other things, true understanding of baseline volume by channel and customer, modelling of promotional uplifts based on historic data and forward looking based on mechanics, pantry loading and forward buying, price elasticity and pre/post promotion volume variances.

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