Price, Promotions and the Pressure
10 November 2015
Ruth Cousins, Marketing Executive
Our research shows that half of UK adults compare their grocery prices regularly. That's right, price remains a key importance for shoppers! As pressure builds from the competitively priced fixed-price retailers and ever popular discounters, the need for convenience stores to mirror this offer is increasing.
Year on year, fewer convenience shoppers expect to pay any price premium. Shoppers still expect to have to pay a slight premium at convenience stores as something they are willing to do when their primary importances are satisfied. However, this expectation has dropped dramatically over the last few years. 40% of UK adults expect a £1 product in a supermarket to cost £1 (or less) in a convenience store.
The prevalence of promotions in supermarkets and subsequently convenience stores is the main reason we saw promotional buying hit a peak in convenience stores in 2015. Promotions reward shopper promiscuity, not loyalty. Thus, the availability of promotions in every retailer, everyday means shoppers are more likely to shop around for whichever brand within a needed category is on offer that week. Almost half of UK adults price compare to some extent when grocery shopping and 14% use a price comparison website!
In order to keep up with the price war occurring across the big 4, convenience stores are relying increasingly on PMPs. Half of shoppers say ‘PMPs reassure me that I am not being overcharged’ and ‘they make me aware of the true price of the product.’ 62% of shoppers who receive promotional leaflets are encouraged by them to visit the store!
Communicating promotional offers pre-shop is also an effective way of drawing shoppers to convenience stores. 62% of shoppers who receive promotional leaflets are encouraged by them to visit and 12% would like to receive promotions via their mobile phones.
Ultimately, convenience store prices are being impacted by other channels. Half of all convenience stores feature a “pound zone” where all products are £1 and promotional buying is at its highest since him! records began. In addition to this, the low-price, good quality model set by discounters means shoppers’ value for money expectations are increasing.
Looking to the future, we will see profit margins squeezed further as the Living Wage bill is expected to be passed into law in 2016. The result? Many convenience retailers will see a hike in staff costs and could struggle to meet the price expectations of these shoppers.