R&FF Retailer: What are some ways to avoid pantry loading and cannibalization?
Through a special arrangement, presented here for discussion are excerpts of a current article from Refrigerated & Frozen Foods Retailer magazine.
Jon Hauptman, partner, Willard Bishop, notes that pantry loading in today's increasingly competitive market isn't necessarily bad, and that most supermarkets are better off if the pantry loading is done at their stores rather than at a competitor.
"There's a lot to be said for shopper engagement - encouraging shoppers to spend as much as possible at your store, even if it means they are pantry loading," he said. "If you get shoppers to shop your store more intensively, you also reduce cherry picking as a percentage of sales."
Frank Dell, president, Dellmart & Co., agrees that pantry loading can help keep shoppers away from your competitors' stores - although products with short shelf lives aren't great candidates. But if you really want to avoid pantry loading, he says, go with frequent promotions, put a limit on customer purchases and don't make your pricing red-hot.
Pantry loading can be fine, according to Derek Smith, vice president of retail industry marketing, DemandTec, unless you're getting practically zero margin and cutting into full-margin sales in the future. Recently, he's done some analysis of multiples pricing, and how shoppers respond to it.
"Using transaction-level data, we can see what happens in each cart when you run these multiples. Let's say that I regularly buy six yogurts at a time. But then, there's a special at four for a hot price. So maybe I buy only four that time around. You may actually be getting a reduction in units by putting on a deal like that," Mr. Smith said.
Using transaction-level data and comparing it against history, you can see if the average units per basket changed based on multiples pricing, he notes. If you collect the right data, you can also see how many new buyers you've gotten, and how much your steady buyers purchased during the promotion.
"The opportunity is to understand the true expandability of consumption within a category. Pantry loading is not a bad term if consumption increases," said Donald J. Stuart, managing director, Cannondale Associates. "If we are simply loading for the sake of loading and extending the purchase cycle then this is something that should be minimized unless the only goal is to steal short-term share."
Discussion Question: What are some ways to avoid pantry loading and cannibalization? Is pantry loading a healthy or unhealthy promotional outcome?