The retail business environment remains very competitive and profits are hard to maintain, according to a number of retailers in recent trading statements. The winner, of course, is the consumer, as many food categories are now cheaper in real terms than they were five years ago.
For food retailers with sales growth under the grocery multiples’ market benchmark - 2.4% for packaged grocery, 4.6% for total till, food and non-foods [Scantrack year to May 2005] - the challenge is to increase average spend per visit in order to drive topline sales. This suggests a return to promotional activity for a number of retailers.
According to this month’s TradeTrak, Somerfield’s share has increased to 6.3% from 5.6% last autumn, net of acquisitions and fascia changes, as new shoppers visit new Somerfield stores. Iceland, however, has once more lost share, down to 1.8% even with the majority of its promotional activity continuing to be multibuy.
In the medium term, Morrisons needs to continue to invest in keeping prices close to Asda and Tesco but, with group market share still not growing, there is also a short-term need to push up basket spend. Homescan confirms that, while Asda has added market share over the past two years in categories in which it dominates, for example dry grocery, confectionery, soft drinks and household, this has primarily been at the expense of Sainsbury and lately Safeway. And growth in market share has temporarily stalled at 17% of total till and 16.1% of grocery.
Shoppers, as well as retailers, are therefore evaluating the benefits of consistent, often low prices against short-term, deep promotional offers or multibuys, as well as the merits of long-term loyalty or discount card schemes.
Mike Watkins, ACNielsen manager of retailer services, comments: “Shoppers still see the relevance of card schemes in encouraging loyalty, but supermarket shoppers primarily expect good value as a reason to visit.”
He adds: “The national launch in 2004 of Somerfield’s Saver Card has been successful in that a higher percentage (45%) of Somerfield main shoppers now believe store loyalty cards encourage shopping at the same store. But it’s not clear if this has been translated into incremental sales growth.”
Expect more retailers to increase in-store promotional activity in the next six months if sales growths continue to slow.
For food retailers with sales growth under the grocery multiples’ market benchmark - 2.4% for packaged grocery, 4.6% for total till, food and non-foods [Scantrack year to May 2005] - the challenge is to increase average spend per visit in order to drive topline sales. This suggests a return to promotional activity for a number of retailers.
According to this month’s TradeTrak, Somerfield’s share has increased to 6.3% from 5.6% last autumn, net of acquisitions and fascia changes, as new shoppers visit new Somerfield stores. Iceland, however, has once more lost share, down to 1.8% even with the majority of its promotional activity continuing to be multibuy.
In the medium term, Morrisons needs to continue to invest in keeping prices close to Asda and Tesco but, with group market share still not growing, there is also a short-term need to push up basket spend. Homescan confirms that, while Asda has added market share over the past two years in categories in which it dominates, for example dry grocery, confectionery, soft drinks and household, this has primarily been at the expense of Sainsbury and lately Safeway. And growth in market share has temporarily stalled at 17% of total till and 16.1% of grocery.
Shoppers, as well as retailers, are therefore evaluating the benefits of consistent, often low prices against short-term, deep promotional offers or multibuys, as well as the merits of long-term loyalty or discount card schemes.
Mike Watkins, ACNielsen manager of retailer services, comments: “Shoppers still see the relevance of card schemes in encouraging loyalty, but supermarket shoppers primarily expect good value as a reason to visit.”
He adds: “The national launch in 2004 of Somerfield’s Saver Card has been successful in that a higher percentage (45%) of Somerfield main shoppers now believe store loyalty cards encourage shopping at the same store. But it’s not clear if this has been translated into incremental sales growth.”
Expect more retailers to increase in-store promotional activity in the next six months if sales growths continue to slow.
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