In this economy lower retail prices are more important to consumers than just about anything else. How far a dollar goes is part of the conversation in every home, every day.
So many times when I speak with retailers and we discuss e-negotiation tools, the categories they want to discuss are expense related categories or not for resale products. The fact is that this area can certainly have its pricing compressed, but it will not have the same impact on the bottom line as a reduction in Cost of Goods Sold or COGS or for resale products. These categories will put more profit in a retailer’s pocket. These categories will allow retailers to reduce pricing for their consumers, and it is these categories that will allow retailers to offer competitive promotions in order to take business away form their competition while also driving a greater wallet share from their top deciles of customers. And finally these categories are the ones that consumers watch every day.
The recent 2009 National Grocers Association SuperMArketGuru Consumer Panel survey taken between November 2008 and January 2009 asked consumers the following question. How important is price when deciding where to shop for groceries? Ninety seven percent (97%) of consumers answered the question that it is somewhat to very important. So, low prices are a huge priority. This author’s assumption is that food retailers are already aware of this.
What can food retailers do? The first thing is to compress pricing on the expense line. You get to keep all of that money. The second thing is to consider ten categories immediately for price compression in the direct spend area and share the compression with your customers. Run an add or place signs telling consumers what you a re doing and why. It might look something like this. “Because of the current economic condition, we are running reverse auctions with suppliers every week in order to drive pricing down on the products you buy from us”. Next week please look for savings in the following areas…
1. Peanut Butter
4. IQF Chicken
8. Jelly and Jams
10. Deli Ham
These categories are a few in which sales are apt to rise when consumers are trying to stretch their dollars. Focus could be made on private label in these areas as well.
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