Fuel and promotions
23 August 2019
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More on Kantar to come next week and the all important context but the Summer has been a real disaster for retailers, clothing is on sale everywhere with so much stock around.
The weather has not just been poor but has actually been disastrous in terms of rain, unpredictability of forecast thus impacting BBQ sales and the lack of heat too.
Not just that, but when it was hot in July, it was so hot that the chillers broke down in numerous stores so sales were missed anyway.
So Kantar made for interesting reading versus ridiculously tough comparatives and the progression of England in the world cup making for a Summer never to be repeated. As we have seen in the current marketplace and indeed, Kantar figures.
A bigger digest next week but alongside the weaker Summer weather, Brexit continues to weigh heavily on news coverage, customer sentiment and a general huge question mark over so many aspects of our life that is has almost become normalised.
However this is impacting customer spending and in times where delays on lorries (in a no deal scenario) go from 20% to 70% as we switch out of British growing season and in to European supply means that customers are unsure if they should be stockpiling cans of Beans and bottles of water, never mind looking at Halloween, Christmas and treating themselves.
Therefore customer sentiment being an issue means that behaviour changes, people are buying less and no doubt spreading money around. We know from the recession that customers have changed their behaviour and they revert back to known tactics to reduce spending.
Discounters benefit as they were the outpost for all disaffected customers post recession as the nation and world grappled with financial instability. Equally convenience stores benefit as customers reign in their 'big shop' and buy little and often to save on food waste.
So to kick start sales, we haven't yet seen the return of coupons - £5 off £40 were a staple of retail in 2010/2011 and are still commonplace in the Irish republic with everyone accepting everyone else's coupons (bar Tesco Ireland due to their low prices). They still happen in the newspapers from time to time via Lidl, however the currency for vouchers tends to be the direct mail shots for loyalty card customers.
The Kantar context to come but as flagged previously, Sainsbury's have done 5/6 fuel weeks out of the past 12/13 post the Asda deal being abandoned and fuel always has a net benefit as it's a big cost at the pump (one that is seemingly sucked up by customers these days).
However it's a direct impact to spending power; any rise in fuel price takes money from other areas. Sure customers can use public transport but that isn't cheap, nor convenient and in some cases it's not possible to switch from using a car either.
So fuel for spend is good, may bring in floating shoppers and also rewards the regular shoppers with money off that they wouldn't otherwise receive. Plus the customer can use the coupon for a fixed period after the event, so have to return to store and may well buy more shopping after filling up.
However the stores have to be set up to impress to get the loyalty for that customer, that is the trick to any campaign like this.
Tesco have their fuel campaign on as well, 10p off with £60 spend (Morrisons was 5p off with £40) and this runs for a fair amount of time. It did last year too which is important to note.
Their campaign runs for 20 days throughout August and could well drive footfall due to the benefits of saving on fuel and then the return journey. But a long running promotion then drives footfall back to store for another coupon.
The idea is when customers get to September then they'll think of Tesco for the run in having being impressed with value, store standards etc.
One retailer in need of a sales boost is Sainsbury's and they've certainly been out fighting post merger disappointment with fuel, 25% off clothing, 5x Nectar points, 25% off 6 bottles of Wine and the price lockdown campaign to try and kick start the business.
An admission that cuts went too far? Or that eye was taken off the ball? Perhaps, but they had to do something and the market is fierce so bringing customers back is made doubly hard. You could set your watch by Sainsbury's in the past, although improving the dial slightly on store standards, it's still a challenging area for them and one that customers could be negatively impacted by.
They have worked hard on price and value with some ends featuring price lockdown and others being fixed at a value point (IE £2) to further enhance the price message.
However it's a long road ahead. You can tell that the fuel is a recurring campaign in Sainsbury's as a close up on another image with the hanging board doesn't feature a start or end date. Meaning stores re-use the signage each time the campaign is active.
How many more to come? They had 2 weeks of it in July and another this week (alongside Disney collector cards) which could well drive spend upwards too. They need it as we enter September and the rush towards the golden quarter.
Whilst benefitting the chain this year with fuel, it makes comps for next year tough already but they are being uncharacteristically aggressive which is very interesting indeed.
Fuel could well become the currency of retailers once again, it certainly is high in price and very prone to inflationary increases too. Asda haven't done anything yet but could they be forced in to doing so?
If the £5 off £40 vouchers start to appear, you know things are getting bad for the market, perhaps that's a logical next step for someone?
But it's Christmas cakes and Mince Pies soon, so one can understand the need to drive spending and footfall in, everyone wants to be 'top of mind' when it comes to Halloween / Christmas.
Whereas in B&M, it's Christmas already.
From the Grocery Insight newsletter archive, first sent to subscribers on 23 August 2019. Steve now writes at read.groceryinsight.com. See also the blog archive and briefings.