British shoppers buy more groceries on promotion than anywhere else in the world. Over a third of all FMCG spending is for items on offer – rising to 45% in the UK’s
four largest supermarkets - with the average household spending £1,480 on promotions each year.
However, change is in the air.
Supermarket promotions have escalated over the past decade, peaking at just below 40% of sales in the years following the global financial crisis.
More recently, the major retailers have been re-thinking their approach in response to pressure from two directions. First, pressure and criticism from the media, consumer watchdogs and the Competition and Markets Authority over claims that many offers mislead consumers. At the same time, Aldi and Lidl have almost tripled their market share in a decade, with their success attributable in part to business models which eschew promotions in favour of ‘everyday low prices’ (EDLP).
Against this backdrop, British shoppers spent £1 billion less on promotions in 2016 than they did last year – partly due to a move away from multi-buy promotions by the big four, who have been opting instead for simpler price cuts. In early 2016, Sainsbury’s announced it was phasing out multi-buys, with Tesco, Asda and Morrisons also reducing their reliance on such deals.
Promotions have historically played a significant part in either increasing sales for old favourites or helping to get new lines established. But the majority of this growth does not boost the overall category – it just shifts volume and revenue from one brand to another – and when an increase in market share is underpinned primarily by promotions, attempts to de-escalate offers can be difficult.
On average, 58% of sales made once a brand is placed on promotion are a direct result of the offer – 42% would have happened without the promotion.
A brand, therefore, has a reasonable amount to gain but also plenty to lose should the scaling back of promotions become increasingly widespread.
Source : Kantar Worldpanel