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European Retail Briefing - August 2015
Analyst comment
 
TIME FOR A MORE SOPHISTICATED ATTITUDE TO PRICING
Colruyt is running a trial offering discounts to customers if they visit the store during quieter times of the day. The logic is simple – it helps spread demand through the day, cuts down the pressure at peak times and makes it easier to operate the store more efficiently. For similar reasons Click-and-collect customers will also benefit from reduced delivery costs of €2.50 if collected during off-peak times, rather than the normal €5.50. Not that there’s much that’s new about that, variable delivery rates have been common for years.

Moving on from the BOGOF
It is great to see retailers beginning to be more strategic about their promotional activity, rather than the mix of BOGOFs (Buy One Get One Free) and dubious price cuts that have become the norm. All retailers are talking about the need to move to an EDLP (Every Day Low Pricing) strategy and consumers seem keen on the idea as well. After all – 51% of people in the UK told us that they prefer lower prices to multi-buy offers (Mintel on the Retailing of Food and Drink, UK March 2014). We will test to see how that proportion has changed in the forthcoming Supermarkets UK, Nov 2015 report. But the growing influence of Aldi and Lidl is likely to have led that figure to rise.

But there is a place for promotions – even Aldi and Lidl realise that with their dump bins of special purchase merchandise and there is no doubt that people like a bargain. But it is time that promotions were designed to strengthen the business and perhaps to work in favour of store operations – as with the Colruyt idea – or even to help suppliers, as with Waitrose’s latest scheme.

Not alone
Waitrose’s new idea is to allow customers to choose the products they get on promotion. Customers can pick 10 products from a list of some 1,000 (likely to be raised to 2,000 in due course) on which they will get a 20% discount. Waitrose will provide the list of the top 10 lines for each customer from their recent shopping habits. Customers should be happy with the idea (and early indications suggest that they are) and suppliers gain from having a steady level of demand, rather than having to cope with massive peaks and troughs familiar from the promotional strategies of other supermarkets.

iBeacon
The key to a successful promotional strategy has to be that it has the maximum impact for the minimum cost. One way to achieve that is by much clearer targeting and that is where iBeacon technology could have a part to play – the idea that mobile devices can be detected when they enter a shop and have messages sent to them.

Where next?
So while there is a clear desire for a move to EDLP, there is also scope for greater use of more targeted, more efficient and, perhaps, lower cost promotions, especially if they can help operate the store more efficiently

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