The current economy is the best time ever for food retailers to use reverse auction tools.

October 8th, 2009

In the current economy low retail prices are more important to consumers than just about anything. How far their dollar goes is part of the daily conversation in every home.

Often times when speaking with retailers about the benefits of e-negotiation tools, the categories they want to discuss are expense related categories or not for resale products. The fact is that this area provides a great opportunity to compress pricing. However expense related categories will not have the same impact on a retailers bottom line as a reduction in Cost of Goods Sold or COGS or for resale products. These categories will put more profit in the retailer’s bank account. These categories will also allow retailers to reduce pricing for their customers, and it is these for resale 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 consumer deciles. Finally, these are the categories that consumers care about and watch every day.

A 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 continue compressing costs on the expense line. You get to keep all of that money. The second thing is to consider ten categories 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 price compression events with our suppliers every week in order to drive our costs down so we can pass lower pricing to you on the products you are buying from us”. Next week please look for significant savings on the following products.

1. Peanut Butter
2. Eggs
3. Potatoes
4. IQF Chicken
5. Rice
6. Tomatoes
7. Juices
8. Jelly and Jams
9. Mustard
10. Deli Ham

The above categories are a few in which sales are apt to rise when consumers are trying to stretch their limited dollars. Additional focus could be made on private label in these areas as well.

As always we appreciate and look forward to your comments.

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