The shopper and commoditisation

Date : 22 June 2016
The shopper and commoditisation

The situation

To some extent at least, shoppers like commoditisation. This is the process that makes premium goods cheaper, special goods more ordinary and rare goods more commonplace.

And, taking price deflation as a marker, we’re seeing more of it today than ever before. ONS pricing data goes back to 1948 and at no other point has UK grocery experienced deflation as powerful, sustained and widespread as it is now. There are three reasons for this:

  • Prices for many inputs (foodstuffs, energy and packaging but not labour) are low and fairly stable, versus recent highs
  • Increased shopper penetration from the discounters (primarily grocers like Aldi and Lidl, but also others), prompting competitive responses from rivals
  • Range development by discounters in areas such as produce, in-store bakery, proprietary brands and premium private label has increased their capability and competitive influence

So as grocery shoppers acclimatise to the more functional end-to-end experience that comes with widespread commoditisation, can they be truly satisfied without emotional engagement? And what, if anything, can industry companies do to reverse the trend?

Ways forward

Products that are commoditised may be un-commoditised or re-premiumised.

In non-food markets this can be done by improving functional attributes of products. Cars, for example, are continuously upgraded by introducing improved engines or better safety systems. Food presents a tougher challenge, however, since creating objective, distinctive and functional improvements to basic products can be difficult. And basic doesn’t always mean cheap.

A grass-fed, Aberdeen Angus sirloin steak, for example, is undoubtedly “premium”, but it is hard to see how it might be made more grass-fed or more sirloin-y. Un-commoditising food and drink may therefore need to be driven by marketing and presentation as well as by product attributes.


Key learnings

  • Every single touchpoint must be reimagined. To truly reset shopper perception, the changes need to ring true from production to sales environment to consumption. 
  • It must be a continuous effort. Without constant development, a newly-premiumised product, brand or category risks falling back into average territory. When one business pushes forward, consumer attitudes and expectations will eventually shift in turn. To develop and maintain meaningful shopper relationships, each brand must understand how it’s perceived at any given moment in time.