Getting Traction When There’s No Action!
November 19, 2008
The current global and local financial crisis has received enough air time over the last 6-8 weeks, so we don’t need to dwell on that too much, too depressing! Suffice to say that we have all been affected in some way or other, and according to leading behavioural experts, the changes to our purchase patterns are likely to be permanent.
Not only do many expect this recession to be far more turbulent and prolonged than past downturns, but supermarkets also have to face a slew of competitors fighting for a piece of the ever-shrinking consumer budget. Traditional supermarkets are battling for a share of the food dollar with a host of other outlets, some of which are their sister companies and are increasingly using grocery items as loss leaders.
Retailers such as Aldi, Go Lo, NQR and Chicken Feed have already carved out niches catering to shoppers who are watching their wallets.
Shopper response has also been extensively covered:
- Trading down
- Drift to discount channels and formats
- Increased purchasing of specials
- Increase in PL sales
- Buying less
- Fewer trips
Yet one interesting fact has started to emerge with Shopper behaviour, both here and overseas – the decline in frequency/ spend in restaurants, cafes and take-aways, resulting in a market share decline in those channels
This Nielsen slide clearly shows that the reversal of a significant year on year trend has occurred, a trend that had previously been consistent for at least 7 years.
The flip side is an increase in market share in the Grocery channel as Shoppers (– working families like us!) abandon eating out and revert to cooking and eating at home. Left overs have also made a come-back, recycled into other meal occasions – dinner to lunch the next day for example.
This is primarily due to a tightening financial market, skittish confidence in the future, declining house prices, increasing unemployment, the acute decline in the exchange rate – so has this been a blessing in disguise for the Centre Store and landed a huge opportunity in our collective laps?
Interestingly the “one stop shop” appears to have staged somewhat of a revival as Shoppers move to a more convenient (and cheaper) pattern of purchase.
With local and overseas evidence clearly indicating that we are all frequenting the Grocery Channel more often, what do we need to do as Suppliers to take advantage of this trend?
Fundamentally there are two options:
- Retreat into a defensive pattern of reducing overall spend and costs to make sure the numbers have the best chance of balancing
- Attack by investing in different shopper and consumer engagement initiatives designed to not only take advantage of the increased traffic flow, but also to gain strategic advantage by engendering trial, repeat purchase and loyalty to our key brands.
So apart from increasing our trade spend disproportionately, and possibly creating a rod for our own collective backs by having more promotions or deeper price drops, how else can we creatively take advantage of this Shopper purchase behaviour change? How can we take advantage of this increase in grocery channel share?
Here are a few thought starters to provide some broad direction:
- Alternative channel development has been an investment of choice and also of necessity over recent years as the strength of the grocery duopoly meant an unbalanced channel portfolio for many suppliers. Foodservice was the logical recipient as we all started to frequent the convenience of eating out. But now as volumes and values decline in the channels that support Foodservice, do we need to provide the support we once did? Can we redirect some of our sales teams focus to support the basics of the Grocery relationship – Space management and Promotional execution? These are traditionally the two worst areas of compliance and would this redirection provide a better return than the current level of support to Foodservice?
- More promotions but at a smaller price drop. Rather than relying on a cyclical price strategy, promote more often to take advantage of the increase in promotional purchasing. Selectively targeting price points will also maintain profitability for the retailer as well as the supplier.
- One interesting twist to this option is to reinvest back into a lower cost, resulting in a lower every day selling price. By then adopting a smaller price drop strategy for your promotional price points, real growth can actually be achieved. Most retailers are resisting price increases in the current environment, an interesting scenario exists for a price drop!
- Commoditise pre-prepared meals, or at least make them more accommodating for the average (working) family to use.
- Cross promote at the shelf. How can I use logic and shopper insights to gain secondary display locations close to the primary location of complementary products and categories? Even clip strips will work in this scenario if the product is compatible for this option. This will inspire impulse purchasing and hopefully support some of the solution selling opportunities that exist with small basket sales.
- Meal solutions that de-stress shopping for dinner or lunch. Younger generations who have spawned and grown up in the café society, do not have the necessary experience (or interest in many cases) to plan meals, let alone prepare and cook meals. How can we provide quick and easy solutions that make for fast shopping decisions and then on the table in 20 minutes, cooked/ tasty and nutritious. Sunrice have been doing some interesting work in this area and have launched some really innovative products targeting this exact opportunity.
- Reviewing the roles and outputs and re-investing in our Field teams. Filling and facing in this environment is just not assertive enough. How can we be more creative with what we expect from our Field teams? What training and then licence can we give them to explore opportunities in Grocery that we have either retreated from in the recent past(usually due to duopoly rules) or have never fully explored. A number of major Centre Store suppliers still set aggressive off location display targets for their Feidl teams each month, and these are usually achieved. The bonus is that by far the majority of these do not involve any further terms investment at all.
So, far from trading in an environment where the financial environment is creating a recipe for disaster, opportunities exist for the astute company that is prepared to invest differently, invest more rather than less and adopt practices that take advantage of changing Shopper behaviour.
The current situation has descended on us faster and more profoundly than any expert could have imagined. Our reaction to those circumstances will be the key determinant to our overall share and profit growth over the ensuing period.