Consumers are ready for a different approach to promotions, writes NICK SHANAGHER
Under Bill Grimsey, Booker had plans to dominate the c-store market with its Premier symbol group. In his thought-provoking book, Sold Out, published at the end of last year, Grimsey suggests the way retailers sell could be ripe for change. But who will lead the charge?
When Louie, Bill Grimsey’s mother, shopped on the high street, she would visit many specialist outlets chatting with retailers and haggling for better prices, he recalls in the book.
The promotional status quo was challenged by Tesco in 1977, when it dropped Green Shield Stamps and moved to Every Day Low Pricing. As a result, it doubled its market share from 7% to 14% overnight.
Today, shoppers mainly navigate through point-of-sale material highlighting promotional offers. The outcome, Grimsey says, is that consumers have lost their bargaining power and must accept what is on offer and that is “not so special either”.
Now the only bargaining power the consumer has is choosing where they shop and what brands they buy. “This makes them vulnerable to promotional stories that are not as real as they first look,” says Grimsey.
Buying a new kitchen is an example that shows how shoppers are complicit in some of the “nonsense” around promotions. Virtually everyone shops in January, at Easter or in the autumn sales, when they can buy the kitchen at 50% off.
“It doesn’t take a genius to work out that the full price that has been diligently established is actually double the retail value of the kitchen, allowing the store to halve its price with no pain to its profit margin whatsoever.”
Shoppers are ready for something new, Grimsey suggests. But who will invent it? And is there a gap for the wholesale channel?
Grimsey admits that when he was chief executive of Wickes, he found it impossible to change the pattern. He suggested an end to marking up a £500 kitchen to £1,000, and simply selling it at the lower price all year. “Try as I might, no one was interested. Even my own team made it perfectly clear that they thought it would never work.”
While readers of Sold Out may conclude that Grimsey has a penchant for strategy, they will also notice plenty of hubris in the retail supply chain. Is this an opportunity for wholesalers?
A second question is, ‘How can wholesalers help their retailers differentiate themselves from supermarkets if they replicate the price-led point-of-sale style of promotions that the multiples have mastered?’
The promotion illusion
A Which? survey from 2012 quoted by Grimsey shows that supermarkets manipulate their offers to ‘give the illusion of great savings, when in reality there was very little to no reductions’. Grimsey shows how ‘home authority agreements’ with trading standards are used by supermarkets to ensure promotions are legal and above board. However, the rules allow the so-called ‘scented candle’ promotion.
Say the list price of a box of scented candles is £1.50. The retailer puts it on display in a remote branch for £2.80 for 28 days. Then it creates a nationwide special offer: buy one scented candle for £2.80 and get one free. The consumer thinks she is saving £2.80 not 20p. “In a lot of cases, retailers are helped by no-one really questioning the facts behind promotions,” Grimsey says.
A challenge for wholesalers is that many of their retail customers view the world as if they were consumers. I have suggested to more than one independent that they simply need to give the impression of having promotions to compete. It is clearly an area where they need more help from their supply chain.
The retail world that Grimsey’s mother used to shop in is unlikely to return. Sold Out is an engaging read that will help you to think about how effective your channel strategy really is.
