Tips for success: Why discounts aren’t enough to drive sustainable growth

Food retailing has undergone a dramatic transformation over the past few years. The start of this decade teed off with pandemic disruption, which was immediately followed by inflationary pressures that gave rise to a cost-of-living crisis and shoppers reined in how much they bought.

However, food retailers and brands have reasons to be optimistic. The end of last year, NIQ data shows that 62% of consumers anticipated they would be moderately or severely impacted by the cost of living; fast forward to February 2024, and this figure has fallen to 51%. Food inflation is stabilising and consumers, albeit still cautious, are beginning to buy more.

In fact, retailers are recovering their sales volumes. And a key driver to enticing shoppers back has been increased discounts. Volume on promotion has steadily increased to 25%.

However, offering discounts is not a long-term strategy that will stand the test of time. More and more units are being sold at a discounted price just to maintain a relatively flat sales volume. The efficiency of promotions (their ability to generate extra sales rather than simply subsidise your existing base level of sales) has slightly reduced across the first half of this year.

So how can brands diversify their efforts in sustaining larger volumes of sales

Grow penetration with shoppers

The reality is, building and maintaining penetration should be at the heart of growth strategies. We know thatgrowth through increases in loyalty alone is very rare​ so there is a continuous need to appeal to new buyers. 90% of the time growth is driven by increasing the total number of people buying your brand​. Yet on average, 52% of a brand’s shoppers won’t buy it the following year. ​Brands in growth will be recruiting more buyers than they lost and sustainable recruitment should be the core strategy of any brand.

A brand’s physical availability is equally important. Brands that grow their penetration succeed by expanding both the breadth and depth of their distribution. And our data shows that a 1% growth in penetration often requires a 10% increase in total distribution points, or by adding one new item in 20% of stores. Equally important is mental availability - our recent Homescan survey found that "familiar and trusted brand" is the second most important driver of choice, right after price.

Personalisation is your friend

Another key shift that we have seen in the market is the growing importance of personalisation. Although shoppers love a good discount on the products they use, they will not be as interested in discounts on items they don't personally relate to.

Retailers and brands should be trying to move from a product-first to a consumer-first approach - through shopper personalisation. Instead of focusing on pushing products to every shopper, retailers need to prioritise understanding each shopper and this is where data driven insights come in.

Leveraging insights on shopper habits is hugely important wherever you sit in the grocery market as it enables more accurate delivery of tailored content, communications and rewards that fit each shoppers wants and needs.

Focus on health and wellbeing

According to a NIQ Homescan survey, this year 32% of respondents said their top concern was their household’s health and wellness (up from 26% last year). As a result, shoppers are more drawn to products that call out their health benefits prominently on their packaging.

For retailers, this means paying closer attention to these trends and reorganising the display of products to make healthier products more obvious and accessible. Therefore it is vital your packaging reflects your product’s attributes. We know a brand only has 13 seconds to communicate its worth on a shelf before the shopper makes their decision.

As we enter a new normal beyond inflation and the immediate after effects of the pandemic, brands need to seize this key moment in grocery retailing. Now more than ever it’s important to understand shoppers and build customer personas that inform the best ways to grow sustainably. While promotions are no doubt a great way to entice shoppers, we’ve seen that putting the shopper first through a higher level of personalisation through tailored messaging, offering added value and a focus on health and wellness trends are equally as important.

Great things can happen when you make the shift from a product-first approach to a consumer one.