A report from the OFT is published in December – likely to be one of their last acts before they merged into the competition commission for having the audacity to speak up against News Corp buying Sky. With NewsCorp and Sky supporting Cameron and the Conservatives, there was only ever going to be one winner.
That aside (!) Their report is based around retail pricing and in particular they are investigating promotional offers that they allege are not meeting customer demand, almost like bait to tempt the customer into store despite never having any intention of stocking the offer to the levels that would meet demand.
A strong allegation of course, for the most part in store availability systems are the source of mystery for all but those who operate them so proof would be difficult but it’s an interesting concept, let’s have a look further into it.
Tesco were cited in a recent Institute of Promotional Marketing report (The Grocer, Oct 2010 -as having 40% of their offers out of stock – Tesco of course rebutted that allegation stating that their availability was at an all time high.
Speaking to Tesco colleagues via an unofficial forum reveals several issues with the BOGTF offers that were launched last week as Tesco aim to save customers £1.3bn with price cuts and promotions (more like the suppliers picking up the slack there!), indeed my personal visits saw the Kelloggs Variety cereal packs and Goodfella’s pizzas out of stock but it’s unclear whether the stock was in the warehouse or just was unavailable.
Alarmingly another poster informs that the 50p Pumpkin promotion that Tesco ran for Halloween was unavailable in 4 stores she visited with 1 store informing her that no delivery had been made at all. A promotional item would have an uplift of 50% or so on normal forecasts so nothing being delivered would be a possible case that the OFT is expected to cite in December.
Of course it’s easier said than done to keep items on promotion on sale, customers will come from far and wide to purchase which is what retailers want, but an unavailable offer means the customer has a wasted trip and the chance to impress them with the rest of the store is gone.
Available or unavailable, promotions are a drug that keeps on giving, it’s not just the products that are on offer at the minute rather the mechanics that are being employed, a year ago you would have struggled to see BOGOF anywhere,. Even the pioneer Morrisons were scaling them back in favour of half price offers, now they are everywhere and their bigger brother the ‘buy one get two free’ has popped up all over with Sainsbury’s and Tesco running their own campaigns and Morrisons returning with their very popular Pringles and Pepsi offer this week.
Interestingly Morrisons manage their main ‘headline’ promos like this via their computer system used for Fresh Foods / BWS promotions and rely on manual orders for the rest, it evidently works for them despite constant media speculation that their systems are outdated so why not for the technologically advanced Tesco (40% OOS) and Asda (25%)?
The OFT need to take a ‘skill or will’ approach the OOS Promotions – are they OOS due to poor store controls – a warehouse full of stock that no one has prioritised to replenish or is it a skill issue with head office allocators and depot loads – are stores getting the right stock that is ordered?
I would say it’s a bit of both, there is little doubt that certain offers are advertised and there will never be enough stock to meet the increased demand, this week at Tesco would indicate they either underestimated the demand or just ordered ‘x’ and had the stores take from this pot – when it’s gone it’s gone.
However, through my work looking at overstocks and in-store replenishment, the biggest reason for overstock is stock that is ex-promo – unsold from a promotion, so it is possible to get enough stock in to meet and exceed demand.
But does only happen when it’s heavily supplier funded and not a loss leader as these BOGTF Tesco offers inevitably will be?
A weekly email covering the latest events in the industry; such as Tesco store operations, store visits or new promotional packages are all covered. Please visit our emailed retail insight page for further information.
Grocery Insight provide market insight on the UK sector with a focus on individual retailers such as Tesco. This insight is useful to various stakeholders and due to my store based focus. Insight can be delivered to suppliers to focus on growth opportunities, analysts and investors to assess the business performance and long term outlook and retailers themselves to assess best practice.