Which would you prefer – more frequent sales on the items you buy the most? Or deeper discounts on key items, but less often?
A new study says too many retailers are opting for the former, when they should be offering the latter.
That’s according to the research firm TABS Analytics’ latest annual “Food and Beverage Study”. Their conclusion is that grocers are spending too much time and money on “failing” niche endeavors like online grocery shopping, while neglecting their loyal, heavy shoppers by cutting back on deals – and allowing old-school promotional vehicles like circulars and coupons to wither on the vine.
“Manufacturers and retailers need to make a significant investment in promotional activity to sustain and grow their businesses,” said TABS CEO and founder Kurt Jetta. “Weaker promotions are directly correlated to weaker sales.”
That decline in promotional activity has led to a decline in heavy buyers, who are starting to look for their deals somewhere else.
In a recent survey of 1,000 “geographically and demographically dispersed consumers”, TABS found that 90% report using at least one “deal tactic” when grocery shopping. But the number-one deal tactic is telling – it’s choosing to shop at a store that offers “everyday low prices”, like Walmart. That means many shoppers are giving up on actively looking for deals at the grocery store, in favor of passively obtaining deals from retailers that offer lower regular prices.
42% of shoppers reported using supermarket circulars to look for deals, down from 50% in 2013. Coupon use is way down as well – 34% say they use Sunday insert coupons, down from 45% three years ago. And 30% use online coupons, down from 38%. “So it’s not as if there’s a switch in the preferred way to get a coupon,” Jetta said. “It’s just people aren’t really using coupons as much overall.”
The figures are even bleaker among younger shoppers. Only 30% of millennials aged 18-34 said they used circulars, and just 20% use newspaper insert coupons – leading TABS to conclude that “the future is grim for Sunday coupons and circulars.”
So is the future brighter for more millennial-friendly options like online grocery shopping?
Not at all, TABS argues. “Online grocery is failing,” Jetta said. “For the fourth year in a row, consumers have turned their backs on buying groceries online no matter how much online grocery retailers try to entice them.” 69% of survey respondents said they never buy groceries online, and only 15% said they do so regularly. “This is not a sustainable business model,” Jetta declared. “Food companies and grocers need to figure out why there is such a high level of dissatisfaction with the online channel before they continue to invest any further in it.”
Instead, TABS says manufacturers and retailers ought to be investing in more and better promotions in the store. “Manufacturers and retailers are pulling back on deep discounts and are opting for watered-down promotions at a much higher frequency,” Jetta argues. But he says they should be doing it the other way around. “Promotional depth always generates more incremental sales than higher frequency.” Jetta says deeper discounts, making up a greater proportion of overall sales, are what’s needed “to kick-start declining sales trends and bring heavy buyers back.”
Then, as millennials grow up, get married and have children, their circular and coupon use may increase accordingly.
But there will always be people who don’t bother looking for deals at all. 10% of shoppers said they use no “deal tactics” at all, up from 7% in 2013. That percentage increases to 12% among millennials.
Yet there’s a bright side to that finding. The more that these shoppers willingly pay full price, the more that manufacturers and retailers will be able to afford lower prices and better deals for the rest of us. And that’s a “deal tactic” that we can all agree on.
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