The market - very competitive out there.
30 October 2017
If we think back to a few years past in the market, just post recession we had the vouchers.... Every retailer was chucking out £5 off £40 as literally free money, even the discounters were doing it. Asda said Morrisons were essentially conducting 'quantitative easing' in the marketplace and it all got a bit silly.
The voucher discounts rose and it became intolerable for retailers, shoppers didn't seem to mind but it did muddy the water on price. Credit Asda back then who backed away from it, rightly calling them gimmicks and sticking to their low prices model as a way to ''win'. Sadly discounters were under cutting them, but their move in the market did lead to the correction and an exit from vouchering as a whole in the market.
Well, at least with the 'free money' vouchers, I.E. where anyone could spend £40 and receive a voucher, or they could get one by buying a copy of a certain newspaper.
Vouchers are still all the rage for any loyalty card holders who receive direct mail. We (as a family) have always shopped around and generally my wife will buy products if she's out with me as I tear around another shop, it's generally all on promotion too but we do spread our shopping, if only for work purposes.
Therefore we then receive a number of vouchers via the post, as retailers see we shop more and try to tempt us to spend more with them, Tesco notably have been sending us more vouchers recently, with some decent offers to stretch our spend. Half the time we leave them at home on the fridge anyway....!
But loyalty card holders will know all about vouchers, they haven't gone away in many respects there. Some retailers do more than others, we haven't had much direct from Sainsbury's recently..... Waitrose sent me £10 off £100, and then a load of vouchers on Wine, save 1x bottle of Champagne at Christmas, I have never purchased Wine once from the retailer.........
Whilst we are not seeing vouchers in the wider market, we are seeing some incredibly competitive deals and tactics out there as retailers approach a peak in the 'golden quarter'. Halloween and then Bonfire night represent valuable trading opportunities as the two events are relatively close and have given way to people hosting parties and events.
Halloween especially has grown hugely over the past few years and is more about hosting and parties, alongside the dressing up element. You can sense just how much it has grown by the plethora of home decorations and adult costumes available in the seasonal aisles of all retailers since the turn of the month.
More to come next week on who 'won' the 6 days or so and who had the proverbial 'horror show'.
But competitive tactics in the market - let's have a look and see who is doing what in a very tight market for spend, driven by the backdrop of falling confidence and spending power for the consumer, rising prices.... Fuelled by Brexit.
We say no vouchers, M&S are giving them out at the checkout up here and have been for a while actually, we received one the other week at a different store.
£5 off £35 in the coming week suggests that M&S are trying to capture spend ahead of Christmas, where they will presumably see a decent level of switching in to them for the festive period. However is trading a bit slow at the minute?
As covered last week, their last food performance (next quarter due very soon) was weak, and more challenging than the slight positive suggested given inflation and a higher exposure to Fresh too.....
Here's Tesco, not letting the grass grow with their 3 for 2 Toy event that has come in to store. They are not new to Toys this year either, they have had seasonal space dedicated to a Toy sale in September (bottom image) with several offers around that were either exclusive to Tesco, or half price or better.
This leads to customers being able to stock up early for Christmas, birthdays are also occurring for many kids throughout the month too. A toy sale isn't just about Toys per se, it's about the footfall it then drives to the store itself and opportunities to gain more spend from customers.
So the 3 for 2 event comes directly after the Sainsbury's Toy sale and looks to steal share away from Argos (always popular for Toys) which in turn, given the increasing numbers of outlets in Sainsbury's stores - has the potential to affect JS themselves too.
It's not just the big toy event that captures the headlines, alongside a strong Halloween offer (although a bizarre use of space in ethnic stores, with Diwali offer still on sale despite the event ending last week).
It's another 6 bottles / 25% off from Tesco. Always a popular offer and the bunting is a nice touch too! Lest we forget that Tesco went pure EDLP on Wine last year and stripped away a number of the multibuys too. This meant that they are able to run the 25% promotion more often and reinvest in a bigger deal to drive footfall.
Fuel is still running too, so Tesco have 3 major deals on the go at one time, fuel on its own is a big deal and a valued footfall driver as it brings customers back to fill up, where the hope is that they'll use the store to make further purchases. With the Toy sale on, the chances of customers stretching spend further with Tesco to benefit from more fuel vouchers is notable.
That said, these deals, together could be viewed at 'stunt' based tactics, especially fuel which is, one would imagine well on its way to a flat margin, if not heading towards negative territory.
However driving sales in to Toys and WInes where margins are better can equalise this investment and drive volumes and trade ahead of Christmas. In addition, with Halloween almost upon us, the costumes and other non food lines available will also attract a good margin for Tesco.
Part of the overall Tesco offer line up is the emergence of more 'scan and win' competitions, a slight Unilever tilt on this one perhaps... But the intention is to get customers to buy the product for one, but secondly, increase swipe rate of the Clubcard as customers think they may win / they'd buy the product and/or swipe their card anyway.
An interesting tactic to drive secondary sales by tying the Clubcard in, either with gift cards or other brand led competitions.
As covered previously, M&S now have more lower prices dotted around the store, Produce benefits from some price cuts alongside the core ranges that are also show lower prices.
M&S pulling that lever due to increased competition in the market, likely that the recent Waitrose price cuts on Essentials forced them to have another look here.
Sainsbury's aren't being left out, given the Tesco tactics will push back against their non food efforts, particularly with Argos also sitting inside a number of stores.... Sainsbury's ran another 25% off 6 bottles of Wine in the week, they have ran this deal a fair bit recently as they strive to keep customers with them and not heading towards Tesco, or even M&S who have also run the promotion.
They also had 25% off Tu Clothing again, this is at typical half term ish deal that allows the Halloween costumes to be discounted also and provides a bit of footfall over the holidays.
But what isn't necessarily tracked, alongside the varied coupons is the 'multiplier' points offers that Sainsbury's seem to run virtually every other weekend based on my emails.
This a larger stretch for customers, typically the thresholds are lower to allow customer to build points on a lower target spend. All the customer has to do is 'opt in' via the email and if they spend above £50, they receive the treble points (usually 1 point per £1) with the tiering going up as above.
Another intriguing way to use loyalty to drive short term sales at least. Sainsbury's not lying down when it comes to tactics in the market, although their lack of multibuys, stable pricing and generally shying away from 'big deals' means customers can be enticed away when bigger deals occur elsewhere.
Intriguingly. The northern retailers Asda and Morrisons don't appear to be getting overly involved with this bar their usual promotional tactics. Asda did have the big toy rollback earlier in the month and both retailers like a promotion so are generally strong, but are seemingly shying away from doing anything around fuel or otherwise.
Who can blame them? It remains a fascinating time in the market and with confidence low, spending power reduced and customers concerned over prices.... Their destination is discount as we've seen on Kantar, the main supermarkets have to be aware that lower prices are still the main aim for a customer.
Deals are nice, but it's the (low priced) bread and butter that matters the most..... But hey,
It's nearly Christmas!
From the Grocery Insight newsletter archive, first sent to subscribers on 30 October 2017. Steve now writes at read.groceryinsight.com. See also the blog archive and briefings.