Are supermarkets ignoring the obvious as they push unsuccessful promotions?
Supermarkets continue to ramp up product promotions, despite inflation woes, ignoring real time data on sales
With the rising cost of food set to overtake energy prices, retailers need to address their promotional planning. Food prices have risen by 19% over the last year as the UK continues to suffer from the most sustained inflation since the 1970s, adding to strained household budgets.
This has left many puzzled as to why supermarkets continue to drive product promotions such as “buy one get one half price” and “buy four get one free.”
Moa Bergstam, Commercial Director RELEX Solutions said, “Amidst the current cost of living crisis, families struggle to afford standard products and are unlikely to be steered towards multi-product promotions. As prices continue to rise, supermarkets’ profits are under scrutiny, and continued promotional focus is not in their favour.”
According to RELEX, one in three promotions are unprofitable and do not increase sales, taking up hundreds of hours a month, with promotions accounting for 18% of operative costs. Most retailers run promotions that drive low sales and low or negative margins.
Bergstam continued, “Most promotion planning is slow, complex and error-prone, meaning the majority of promotions do not benefit customers as well as supermarkets. Most retailers lack end-to-end management actionable insights, accurate forecasts and price optimisation.”
Top UK supermarkets such as Sainsbury’s and Tesco have announced planned price cuts to food items in recent weeks. Yet there has been no mention of the current promotional sporadicity. The price of items such as toilet rolls, pasta, fruits and vegetables are at an all-time high, with many spending more but for less.
“Retailers must move away from physical promotional planning and adopt an automated approach. Many promotions are planned on gut feeling and based on the same playbook every year, leading many to lose control of promotion performance and outcome. Automated solutions identify the top performers based on previous data allowing retailers to identify the best promotions for their customers.”
Bergstam concluded,” Retailers must take greater care in their promotional planning and assess the current economic landscape, with inflation at an all-time high. Physical planning is the route of the problem with retailers set in their ways. Automated solutions can identify the best-performing promotions through data analysis, ensuring adequate promotions are in place. With families already struggling to purchase the bare necessities, it is unwise to push unrealistic promotions at this time.”