Long held as the enemy of profit margins, pricemarked products (PMPs) are now a familiar sight when strolling around a convenience store. But why are so many more c-store retailers jumping on the pricemark bandwagon? Is it all to do with the credit crunch?

The latest HIM survey of retailers shopping in cash & carries revealed that 66% of retailers believe that pricemarking is either effective or very effective when promoting a product within their store, compared with 8% who say that it’s ineffective or very ineffective.

Pricemarking proved to be most popular within soft drinks, with 42% of retailers surveyed buying pricemarked packs in their wholesaler.

The survey also revealed that retailers want good value for their customers, even if that comes at the expense of profit margin – 45% of those surveyed say that the pricemark should be below a rrp and 30% say that it should be at rrp.

HIM director Tom Fender believes the rise in popularity of PMPs goes hand in hand with the decline of the UK economy.

“Consumers were prepared to pay a significant premium in c-stores over the price they thought they paid for the items in a multiple supermarket. Why? Because of their locality, convenience, the chance to support community retailers and the fact that money wasn’t tight.

“However, the credit crunch has arrived and many convenience store shoppers are now saying they will increase the number of local shopping trips – saving on transport costs travelling to the supermarket as money is getting tight. So now it’s up to c-stores to focus on delivering and communicating value, and promotions play a part in this.”

Fender also believes that consumers are looking for instant savings and that the popularity of buying two-for-one offers is waning as a result.

“Consumers are cutting back on buy-one-get-one-free (bogof) offers; they want simple money-off promotions. They are also increasingly aware of the chance of wasting food if they buy bogofs – about one-third of products bought on bogof are thrown away.”

Who's in control?

This change in consumer attitude has managed to sway retailers' views on PMPs. Says Fender: "Retailers have always been against PMPs because they didn't want their retail sales prices to be controlled. However, times are changing. Some 36% of consumers say pricemarking would encourage them to buy the products. This can only be good for retailers."

Steve Fox, director of retail at Booker, says that the perception of value is important to consumers and that PMPs help to convey this message. "Retailers are asking for more PMPs as they want to give their customers better value."

"We're definitely stocking more pricemarked lines than we did last year. Both our own lines and branded lines are leaning towards pricemarking, although I'd rather that suppliers gave the choice between pricemarked and non-pricemarked. It's not going to suit every retailer to have PMPs in their store, so suppliers shouldn't force them to buy those lines. The retailer should have the choice."

One concern that both Fender and wholesalers shared was the price that suppliers put on the goods.

"Suppliers shouldn't jump to cut the price of the line - keep it at the rrp," Fender suggests. "Communication is the important thing - consumers want to know that the retailer isn't trying to charge rip-off prices."

Fox agrees that the price should be fair to both the retailer and consumer. "The reason PMPs didn't work in the past was because the price wasn't fair to the retailer. Thankfully, this has been remedied in most cases."

Fox doesn't foresee an end to PMPs, especially in the current climate. "The economy will be tough for the foreseeable future and disposable income will start to disappear. People are looking for the best value around and PMPs, in their opinion, offer that value."

Fender sums up why PMPs will continue to grow stronger. "Some 49% of retailers shopping in cash & carries bought items with pricemarking. If one in two retailers right now are buying them, they must think that they support a value proposition to shoppers. Shoppers like them, retailers now like them, so there's no reason why we shouldn't continue to see more PMPs in the marketplace."
The case for pricemarking
Gayshyam Patel of Lower Edge Newsagents in Bolton is a strong advocate of PMPs and has noticed that the amount he's selling has increased in the past few months.

"I've always stocked PMPs but now I'm stocking a lot more than before. The volume of sales from these goods is huge and counteracts any reduction in profit margin."

Gayshyam adds that his customers are happy to buy them as it makes them feel they're getting a good deal. "Even if the price on the product is only a little less or the same as rrp, customers think they are getting a bargain, which leads them to come back to shop here again. They know that we haven't set the price and that makes them more likely to buy the products."

He believes that all retailers will have to consider PMPs if they are to remain strong. "Here, there's a demand for PMPs, but wherever you are they remain a great way of keeping customers loyal."
The case against pricemarking
Belfast Spar retailer Martin Briggs is against pricemarking and is calling on his fellow retailers not to stock them. "I think it's unfair that in 2008 I'm being dictated to about price. Retailers have to be given a level of control in their own business."

Martin feels that manufacturers have created a scenario that jeopardises retailers' profits. "Manufacturers will come up with stories about how it's good for the customer, but so are 25% extra-free promotions. Small retailers can only exist on profit and if that is dictated to us by manufacturers then we won't be in business for much longer."

He adds that manufacturers haven't taken into account the overheads that a retailer has to pay. "Take chilled products, for example. We have to pay the refrigeration costs to store those products. That's not accounted for in the pricemarked scenario."

Although vehemently against pricemarking, Martin has stocked some PMPs for the Christmas season. "If I don't, I won't have any Christmas stock as there's no alternative. It's basically putting a gun to my head. After Christmas, I'll be able to review the situation, but until then I'll have to deal with it."

"I'm not against promotions and I'm all for offering customers good value. I just want to be able to control my own prices."