As buyer power increases, so does the pressure on manufacturers to discount in-store. The money that many used to spend on advertising is now being spent on promotions - and it's eating into margins.
In this blog post, we exploring this tricky issue and provide a win-win, shopper insight-driven solution for both manufacturers and retailers alike.
In 2019 Australian manufacturers face mounting pressure from retailers to fund much of what goes on in the store environment... think merchandising, POS, insights, discounts, promotions and more.
Retailers often have greater control in the relationship and this can limit manufacturers on where they're able to spend their dough.
FMCG manufacturer margins and growth levels are, generally, slim in comparison to other industries. This means they need to make their spend and efforts with retailers work as efficiently as possible. All the while, they're having to reduce prices to attract and retain customers - eating into margin.
Shoppers have more and more control over where to shop for food and drink with many options available to them today.
Aside from the big powerhouses - Coles and Woolworths - international retailers like Aldi and Kaufland have moved in, as well as online retailers like Amazon. Meal delivery companies are popping up left, right and centre. People are prioritising local farmer's markets at weekends. Then there's the ever-growing number of restaurants as an alternative culinary option.
In this environment, retailers need to remain competitive, attracting the right traffic and increasing total FMCG spend in store.
Shoppers are repertoire loyal (to retailers and brands within categories i.e. they have a small repertoire that they regularly use), but often not brand loyal.
They're fickle beings with more choice than they know what to do with, but at the end of the day, satisfied shoppers = greater opportunity to charge a higher price (and earn more margin). So, we better keep them happy!
Creating a win-win
So, in this situation, how can we increase category spend in order to benefit both manufacturers and retailers? How can manufacturers work with retailers by leveraging clever insight to get shoppers to spend more and shop more often?
The answer is in understanding the path to purchase, as well as the barriers to category and brand purchase along that path (within the store). Here you have an impetus for change that impacts shopper behaviour in-store and goes beyond discounting.
In a time when buyers have the power, it is important to operate from the perspective of what works for the shopper rather than focusing on what is easy to implement.
To optimise the situation for both parties, we recommend doing some "pain points" shopper research to evaluate consideration. This way, you can uncover barriers that aren't just about price, but could be around flavour or location. As a manufacturer, you can then confidently go to a retailer and provide an opportunity to increase sales without the need for discounting products.
For example, say you're a manufacturer that realises mums keep buying lollies as a treat for their kids on shopping trips. However, these treats are given begrudgingly by mum because they're full of sugar and other nasties. Here lies the opportunity to place low priced toys to interrupt the journey (e.g. near the checkout). These toys are a higher priced item which benefits the retailer (better sales = win) AND a more preferable option for mum (not as naughty as sweets = win).
How can YOU create a win-win?
Over to you
Here at PLAY we love all things shopper - from online surveys to accompanied shops and everything in between. If you want to find out more about our solutions, click HERE.