Shopper Reaction to Out of Stocks
Improving on-shelf availability remains a key goal for retailers and manufacturers as research has continually shown that shopper loyalty to stores and brands is eroded over time when continually faced with out-of stocks:
Source: ECR Europe blue book ‘Optimal Shelf Availability -
Increasing shopper satisfaction at the moment of truth’
On the first occasion an out of stock on a particular product is encountered, a shopper is more likely to make a substitute purchase, a different brand or pack size, than to make no purchase at all or to change to a different store.
The second time an out of stock is encountered on the product, a shopper is equally likely to make a substitute purchase as to make no purchase or change to a different store.
On the third occasion that an out of stock is encountered on the same product, the shopper is far more likely to make no purchase at all or change to a different store (or indeed retailer) than they are to make a substitute purchase.
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Shoppers are:
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Eating more at home |
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Cooking more from scratch ingredients |
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Shopping around more |
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Taking more time over choices | |
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Challenging Shopper Behaviour
Through 2008/09 the UK economic performance weakened significantly, with multiple indicators turning negative simultaneously. 2007/08 saw sudden surges in both food and fuel prices, and while the prices of some commodities have fallen back, long term inflationary pressures remain.
When consumer confidence declines, changes in shopper behaviour soon follow.
Buying products on promotion
The single change claimed most by shoppers in recent months is to buy more on promotion. This may be a reflection of changing retailer tactics as much as a concerted effort by shoppers.
IGD research conducted in 2008 showed that four in ten shoppers bought more products on promotion in the previous six months compared to only 5% buying less.
Time investment in shopping
In contrast to the cash rich/time poor shopper talked about in the past, we are now seeing more people prepared to invest more time in an effort to be smarter with their money.
IGD research showed that;
- 27% of shoppers said that they have been shopping around to look for the best deals
- 25% of shoppers said that they have taken more time over shopping and choosing products
Shoppers are shopping around for the best deal
Source: Tesco, 2009
By investing more time in shopping, people have demonstrated a willingness to sacrifice time in favour of money. It may be that these behaviour changes are here to stay and not simply a short term phenomenon, as shoppers experience the benefits of shopping smarter.
Channels used
With people shopping around to find the best deals, retailers have been competing hard to retain existing customers and attract new ones through launching deep cut price promotions and communicating key messages around value for money.
Shoppers have a growing appreciation that they can save money by shopping around at different retailers, with most shoppers claiming to use discounters while using premium stores and retail parks less frequently.
Whilst shoppers are changing their shopping patterns at a retail level, with some channels out-performing others, the whole food retail sector is benefiting from shoppers eating out less. With personal budgets under pressure, many are now choosing to dine at home rather than out.
Products Purchased
In order to manage household budgets, shoppers are most likely to cut back on non essential items. However as essential items become increasingly expensive, they will also look for ways to manage these costs either through shopping around or cutting back. With a wide choice of products available to shoppers, there is clearly an opportunity for them to trade up or down across most categories.
With supermarket retailers carrying a wide range of products in most categories using a tiering system of ‘good’, ‘better’ and ‘best’, shoppers do not need to change store or retailer to make savings. For most categories it is possible to purchase products at many price points and make adjustments to purchasing within store by moving up or down or across the different tiers.
Recent months have seen a shake-up in the format of food chosen, with prepared foods loosing out to fresh and chilled products. A move towards better meal planning and cooking from scratch also favours the purchase of fresh and chilled products.
Frozen and tinned foods have had mixed fortunes, with IGD research showing that a similar percentage of shoppers are reporting that they have bought more as have brought less. However for sectors previously in long term decline, even a relatively small increase is positive.
Shoppers are increasingly aware that throwing food away also means throwing money away and they are paying more attention to meal planning and cooking with leftovers.
Promotions and Customer Loyalty
Promotions have a greater influence than advertising, merchandising or advocacy in persuading shoppers to buy new food or grocery products.
Changing Promotional Strategies
The mix of promotional mechanics used by retailers has been changing subtly over recent years, with a stronger emphasis on single unit price cuts rather than ‘multi-buys’ such as ‘buy one, get one free’.
Changing retailer promotional strategies
Source: TNS Worldpanel 52 w/e July 15 2007 vs 52 w/e July 12 2009
The chart above shows both the proportion of store turnover generated through promotions and the breakdown by promotion type.
What shoppers like/dislike about promotions
In most cases, shoppers take a simple approach to promotions; the more they save, the better they like them. However, promotions can leave shoppers dissatisfied, and products being out of stock is one of the greatest sources of annoyance.
IGD research conducted in September 2009 reports that more than a quarter of shoppers rank availability problems for products on promotion as a key disadvantage.
Availability remains the biggest challenge to promotional effectiveness in the eyes of the shopper.
Source: IGD Consumer Unit, 2009
What this means for the Industry
In this recession, many shoppers are reassessing their options, forming new perceptions about quality and value and are prepared to change to find these. These changes are challenging for the food and grocery industry, though they also create opportunities. Businesses must be prepared to keep changing as customers keep changing, and keep offering both value and values.
The economy has not been the only factor driving change in the last year, however it has been the predominant one and it is accelerating some pre-existing changes. The challenge for the industry is that these changes may not be temporary since new behaviours can be ‘sticky’ and may persist beyond the recession.
Since the most significant input into promotional forecasts is historic information, the above mentioned changes in shopper and retailer behaviour make forecasting much more difficult. [see Forecasting]
Further Information
The research included in this section is taken from IGD consumer research published in 2008 and 2009. More information, as well as a greater detail on the subjects mentioned, can be found in the following reports:
Focus Areas:
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Other key areas of the supply chain:
Promotional On-Shelf Availability - Next steps:
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