During challenging economic times, coupon use typically rises. But what happens when manufacturers and retailers are experiencing economic challenges, too?
They raise prices, cut back on promotions, and everything we thought we knew about coupon use typically rising during challenging economic times goes out the window.
That appears to be the case right now, according to a new report by Advantage Sales, a division of the business solutions provider Advantage Solutions. The report, based on surveys of 79 consumer packaged goods manufacturers and 36 grocery retailers, finds that most are “rethinking their pricing, supply, new item and trade promotion strategies” to adapt to supply chain problems, employee shortages, rising commodity prices and other challenges.
Three-fourths of the manufacturers surveyed, and two-thirds of retailers, said they will be changing their promotion strategies over the next six months. For seven in ten manufacturers, those altered strategies will include reducing traditional trade promotions, such as coupons and in-store sales.
Only 16% of manufacturers and 15% of retailers think increased promotional activity will help drive sales growth into the new year. Instead, the number-one factor they believe will lead to higher dollar sales – is higher prices.
To offset rising costs, nearly all manufacturers – 92% of them – say they are planning to raise prices, or have already done so at least once since the coronavirus pandemic started. A fourth are planning, or have already implemented, a second price increase, and 16% are already eyeing a third price hike. About a fifth of manufacturers are trying to mitigate price increases with strategies like eliminating product varieties or shrinking package sizes.
So when will things start getting back to normal again? Both manufacturers and retailers expect supplies to rebound by early next year, with manufacturers even more optimistic in predicting that supply levels will top 90% before the end of this year. At that point, manufacturers predict that fully-stocked shelves, more than price hikes and reduced promotions, will be a key driver of increased sales.
One of the only pieces of good news in the survey for consumers, then, is the prospect that normalized supplies may finally help lead to normalized prices and promotions. But the other good news is that, in some cases, they won’t have to wait. Not many, but some, manufacturers say they are actually increasing their promotional activity – largely in order to help promote new products. “Indeed, after a pandemic-driven slowdown in innovation,” the report reads, “four in 10 manufacturers say they’ll increase new product introductions over the next 12 months compared to their pre-COVID level of innovation.”
And, even in a pandemic, nothing helps move new products like coupons and promotions.
“I don’t really value share from promotion alone,” Kimberly-Clark CEO Mike Hsu told investors recently. “If we can use promotion to drive the trial that we want on our innovation, I’m supportive of that.”
Other manufacturers are cautiously optimistic that their promotional plans will start returning to normal soon. “We did pull back on promotions this period, promotions and couponing. And we did it pretty early on because it didn’t make a lot of sense to be promoting to shelves that weren’t more completely stocked,” Church & Dwight CEO Matthew Farrell told investors recently. But with in-stock levels improving, “there is an opportunity to start introducing trade promotion back in 2022. And that is our intent.”
Coupons and deals haven’t completely gone away, of course. So you can still save money at the grocery store – just not as much as you once could. But 2022 might be different. So if your New Year’s resolution is to save money – here’s hoping manufacturers and retailers do their part to help you keep it.
Image source: Jennifer Uppendahl on Unsplash
