Retail promotions: Avoiding a promotions catastrophe

Richard Moule
IRI

Brand owners must wean the supermarkets off their addiction to trade promotions if sales volumes and margins are to rise for everyone.

The world of price and promotions within UK retailers is at a tipping point, with a potential crisis looming.

Loyalty to brands and stores is at an all-time low because shoppers are deal-weary. They see little difference between the supermarkets, and the UK has the lowest number of consumers in Europe who choose a store based purely on the promotions inside.

The original purpose of promotions was to encourage first-time purchasers, increase buying frequency and promote new lines. The high level of deals today is just white noise to most shoppers.

Up until 2012, promotions were crucial to sustaining volumes, but this is no longer the case. According to the IRI European Pricing and Promotion Special Report 2013, the volume of goods on any promotion was up by 2.7% across Europe, yet volume sales dipped by 0.1%. The UK has traditionally had the highest level of trade promotions but the rate of growth is finally slowing.