Fewer promotions at smaller discounts on the US fresh food retail market is reportedly failing to attract consumers, who, having been inundated with promotions in 2009, are not reacting as strongly to the new promotional strategy.
According to a new survey from the Perishables Group, the cut in promotional activity is an attempt to manage profit margins in response to the rise in prices, caused by inflation, within the fresh food industry.
Perishables Group point-of-sale supermarket data reveals promotional average retail prices are increasing at a greater rate than everyday (non-promotional) prices in all of the fresh departments, supporting the trend of retailers focusing on everyday low prices rather than infrequent, larger discounts.
Circular advertising counts are also flat or declining in all fresh departments except the bakery category, according to the analyst.
Indeed, Wegmans recently announced that it is even reducing the frequency of its printed circular, in favour of using that money to keep prices low and provide more in-store samplings.
According to the Perishables Group, when promotions are featured, they are making less of an impact on shoppers.
“Declines in the percentage of volume sold on promotion during 2010 indicates consumers did not respond as strongly to promotions as they did in 2009, and to a lesser extent the previous few years,” the agency explained.
“These declines don’t necessarily indicate that consumers no longer value a good deal, but they aren’t seeing them on the shelf or aren’t being as responsive when a good deal is offered.”
The Perishables Group claims these factors are combining to create a unique environment on the US retail market.
“Much of the promotional strategy in the fresh departments is still based on seasonality, market availability and response to competitor activity,” the analyst stated.
“Though the data and tools to provide promotional insights were very limited just a few years ago, more sophisticated information is now available to help us figure out how to promote more effectively in the fresh department.”
Now more than ever, the Perishables Group says it is essential to fine-tune promotional strategies to get the most ROI from this significant investment of trade dollars.
“Prices are increasing for every step of the supply chain, but retailers and suppliers can work together to ensure pricing and promotional strategies are as profitable as possible.”
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