Supermarkets Get the Best of Promotional Offers
By Bernice Hurst, Managing Partner, Fine Food Network
The UK’s Daily Telegraph has reported that, following analysis of more than 15,000 supermarket promotions across 30 different categories over the past five years, researchers Billetts concluded that almost 90 percent of the profit on anything sold during money-off promotions is kept by the retailers.
Billets, part of marketing analytics company Thomson Intermedia, claims that suppliers end up with only 14 percent of the profits from the sales as they pay to have money-off offers in the hopes that increased sales will contribute to their top line.
Fast-moving consumer goods (FMCG) suppliers reportedly offer some £8 billion ($16
billion) each year in the U.K. on trade promotions. The Billetts research looked
at invoice pricing, funding levels and other volumetric data. As a result,
they believe “suppliers often enter into negotiations with retailers with no clear plan and therefore let the retailers set the agenda,” according to the Telegraph. “Other common mistakes made by suppliers include giving away too much information at the start of negotiations, and poor negotiating skills.”
Just days after the report was trailed, The Telegraph also reported that supermarkets are increasing food prices for customers at a faster rate than their costs are rising for the first time since the economic downturn took hold.
Although Britain’s four main supermarkets have announced a series of “inflation-busting” discounts recently, critics describe many of them as marketing ploys, of limited benefit to most consumers.
While trade body British Retail Consortium claims retailers have absorbed more increases than they pass on, an Asda spokesman told just-food, “People should give credit to food manufacturers and retailers for keeping inflation down. There is a huge body of evidence to suggest retailers are cushioning consumers.”
Economists, however, said that it was difficult to make exact comparisons between the factory figures and the consumer figures. And the government’s consumer watchdog has suggested that supermarkets cut prices on all products, not just a selected range.
Discussion question: Are you surprised by the study showing that British retailers gain a much bigger benefit from special discount offers than vendors? Is the situation similar in the U.S.?
- Suppliers lose out on special offers, claims report – Daily Telegraph
- Supermarkets accused of taking advantage of food inflation to increase prices – Daily Telegraph
- Industry “deserves credit” for keeping inflation down – just-food