The Australian grocery sector saved $1 billion in promotional spend in 2018 – one of the biggest turnarounds in the past decade.
In the past, says Nielsen Connect Pacific Managing Director Bernie Hughes, the percentage of products sold on promotion in Australia has been on an upward trajectory. In 2017, this resulted in $11.2 billion being wasted on reducing prices unnecessarily.
Last year the amount wasted on price promotion dropped to $10.1 billion.
Impacts of low percentage of sales on promotion
- Innovation: more money is invested in research and development for new products and store concepts.
- Prices: less price competition equals higher prices for shoppers
- Shopper benefit: more access to a variety of shopping experiences that offer products to meet a range of consumer needs
- Risk for the sector: increases the risk of a new entrant causing disruption.
- Supply chain: capabilities to forecast baseline volume and produce items accordingly.
A spare $1.1bn
The $1.1 billion is the equivalent to opening more than 30 new supermarkets across Australia, says Mr Hughes.
Rather than putting this much money into promotions, it is possible for companies to aim their finances towards research, development and marketing efforts to address local consumer needs. For retailers, the savings could be reinvested into visioning, scoping, launching and improving brick and mortar and e-commerce store formats that will improve the overall shopping experience.