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 Retailer strategies are continuing to evolve as retailers work harder than ever to differentiate and demonstrate value to their shoppers. Focusing on promotions, price and private-label, we’ve looked at some of the latest developments in Europe and the US.
Value ranges – the new Wal-Mart approach
Wal-Mart, as a retailer, already stands out for its strong value credentials, and it continues to strengthen this focus, not least through its new look value range. Relaunched in the past few days, Wal-Mart’s Great Value range is already a major brand in its own right in the US, but in a market where private label penetration remains modest, there is clearly further growth potential.
Extensive product reformulation has been accompanied by redesigned packaging, intended to create a consistent and recognisable look in-store. There are more products in the range too, with over 80 new products, including thin crust pizza, organic cage-free eggs and strawberry yogurt, raising their total SKU count to over 800. This should help boost the profile of the range.
Wal-Mart is among the best performing retailers in the US at present with outstanding value credentials, but it is not the only retailer doing well. Dollar General for instance, recently reported full year like-for-like sales growth of 9.0%, as total turnover reached US$10.5bn. And Aldi, having built an estate of 1,000 eponymous stores in the US, has been accelerating its own expansion plans, moving into new territories such as Florida.
There are, however, still opportunities for those positioned across various segments of the market. The solid performance of the Safeway chain, aided by an expanded private label range and a focus on lower prices, demonstrates this.
… and lowering prices
Value initiatives are coming through far and wide at present. The latest Carrefour move in Spain is an example, whereby the retailer has pledged to reduce the price of over 10,000 lines by up to 25%, as it seeks to bolster its value credentials and establish itself as the cheapest grocery retailer in all catchment areas. In a market in which the value-focused Mercadona and Carrefour’s own discount Dia chain have been the key winners, this is a significant move. Lars Olofsson, the recently installed Carrefour CEO, confirmed that this strategy, if successful, will be adopted across other markets.
And while both the US and Spain rank among those countries most impacted by the global economic downturn, a wave of new price initiatives have also come through in Germany, which, to date, has experienced a less severe downturn.
Indeed, price remains very much to the fore in the German discount sector, underlying the imperative of delivering operational efficiency. Just last month discounter price competition intensified further, as both Penny and Norma announced a new wave of price reductions.
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| Shoppers are buying more value private label | |
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Value retailers benefiting from more shopping around
In the UK, shoppers are telling us they are buying more products on promotion, shopping around more and buying more value private label – a segment of the market that is delivering very strong double digit growth rates for each of the leading retailers. The trend for consumers to shop around more comes through in retailer performance, as frozen food specialists and discounters continue to generate robust growth. And the likes of Home Bargains, B&M Retail and Poundland – all value-led high street retailers - are also enjoying significant growth at the current time.
In addition to this, best practice initiatives have fed through more broadly, for example, the extensive use of rounded price points and, more specifically, of £1 ranges, notably in both Asda and Tesco at the moment. Clearly, it’s easier for shoppers to budget when they are buying rounded price point lines, and any more discretionary products at that price point come across as highly affordable.
Making more of events
To demonstrate value, retailers are also becoming more innovative and imaginative in their use of promotions. A key theme is making much more of events, and a raft of Valentine’s Day deals was one part of this, while more recently, Mothers’ Day deals have come much more to the fore. A £9 roast dinner meal deal from Morrisons, and a £15 roast dinner meal for four at M&S are just two recent UK examples. As with Valentine’s Day, the trend towards eating out less creates a grocery retail opportunity. Further initiatives of this kind can be expected at Easter
But in this climate, the key requirement is to deliver outstanding value at the same time as retaining key points of difference. The recent launch of the Essential Waitrose value private label range provides a good example of this approach, as does Sainsbury’s continuing focus on communicating ethical points of difference, even in its Basics range.
The bar continues to be raised, and this points to further developments in private label in the future, as retailers look to build and develop points of differentiation. From a promotions perspective, simple, transparent mechanics that communicate on price appear to resonate particularly strongly with shoppers at the present, as do simple, rounded price points. Clearly both tools help demonstrate affordability and make the process of sticking to a budget more straightforward for shoppers. Expect this to shape pricing and promotional strategies further in the months ahead.
More information:
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| Retail Analysis |
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For more information on retailer strategies, visit Retail Analysis, IGD's online guide to retailers, markets and channels. |
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