Offering value for money, in all its guises, is becoming a neccesity for c-store retailers, whether it’s round pounds, pricemarks or meal deals
Refusing to have pricemarked packs (PMPs) in your store is a mistake. That’s not a comment from a supplier keen to get their products out on your shelves come what may, but instead from an independent retailer who has ‘seen the light’, so to speak.
Alan Waterson of J Walsh in High Wycombe, Buckinghamshire, is that retailer, and he resisted certain PMPs for quite some time. “When Booker brought out their 35p Euroshopper energy drink I refused to have it. I said I preferred to offer more expensive drinks instead, and to make a sensible margin on theirs I’d have to buy it in at 20p. I’d had people come in and ask for it, but I had to turn them away,” he says.
“But then Booker gave cases of the drink away with other purchases and I put it in the shop because it cost me nothing. Today it’s one of my best-sellers and I sell a case of 24 every day. People don’t just buy one can - we have one lad who comes in and buys six every day. Now I hope he is not drinking them all himself; I think he buys them for his workmates.”
Alan keeps an eye out for the drink on promotion: “Every so often you can get three cases for a tenner and make a good margin on it. If pricemarks are on promotion - even better - because retailers need value, too.”
He gets the majority of his stock from Booker and, as he lives near the depot, he pops in three or four times a week. “I get their emails and promotional sheets about offers, but it’s good to go in and see what’s on offer as well.
“Booker always has the profit on return on its labelling so you can see how much you’ll make if you sell at the rrp - they do this for both the non-PMPs and the PMPs so you can see exactly how much you’ll make.
“There is a worry about not being able to control your margins with PMPs but you have got to think of the customers, who know exactly where they stand with PMPs.”
He adds that local shops are still often perceived to over-charge, but with PMPs on display that’s no longer an issue. But you have to work hard to buy right and get the best price, he points out.
“It’s not just independents who have a reputation for premium prices - look at how much WH Smith charges for a bar of chocolate. I sell everything at rrp or less.
“The most common conversation I have with my customers is them saying to me: ‘You’ll never guess how much I paid for this at so and so.’ I always want to say why didn’t you come here then?”
In Kent, Londis retailer Binny Amin says his customers are definitely looking for value. “They expect to find everyday products at very competitive prices, so we are offering more PMPs and lots more multibuys.
“In the past we’d been very selective about the PMPs we carried, but we have changed things around and are now stocking loads more. In biscuits, for instance, we mainly carried non-PMPs. Sales were low, but margins were high. Now most of the range is pricemarked. People are looking at prices in the supermarket and those prices stick in their heads so they know when you are offering really good value for money.”
Away from the biscuits aisle, Binny picks out Coca-Cola as being “awesome” in supplying PMPs, and Warburtons for being really good at providing PMPs that retain their margins for the retailer.
In Wales, Spar retailer Conrad Davies says he, too, has a lot more PMPs now among his four stores. “Blakemores has a separate book for PMPs to help us maximise the offer. Cereal is a good example. Since introducing PMPs on these products they sell rather than just gather dust.
“And if you’ve got a PMP on promotion it’s even better. The customer can see that if it’s got a £1.80 flash on it, but you are selling it for £1, then it’s really good value.”
However, Mondelez International trade communications manager Susan Nash warns retailers to not go overboard on PMPs: “PMPs are a type of promotion, so retailers should be advised to consider how much of their stock they want to be perceived as ‘on promotion’ - if they are offering nearly all their stock as PMP, is this giving shoppers an expectation of a store that can’t be continued long term?
“Retailers can use epos data to measure and track the success of PMPs. If they aren’t selling any more products as PMPs, they should look at their range again and see if a non-PMP line might be more appropriate.
“It can also be confusing to have PMPs where retailers are offering product group promotions such as meal deals, so check that the PMP price doesn’t undermine another promotion in store, confuse or, even worse, mislead the consumer.”
Nash says that confectionery is an appropriate range for PMPs as it is such an impulsive category. Research carried out when Mondelez was still Kraft found that 97% of chocolate singles consumers would buy a PMP.
“Retailers should make sure they have a great display in key areas, so consumers can see PMPs and maximise impulse purchasing,” she says.
Conrad reckons everyone is after a bargain, no matter what their financial situation. “I know of households with £100k a year income and even £200k a year incomes where they shop at Aldi and Lidl and are quite proud of the fact.”
It’s therefore much more difficult to pigeon-hole customers and assess how valuable they are to you. Alan categorises his customers by the newspapers they buy. “We’re an affluent area, but we have a good mix so I sell 120 copies of the Telegraph a day and 120 of the Sun. But most of those Telegraphs are sold on subscription and the people who have that paper don’t spend a single penny more in the shop. Whereas the Sun readers will pay 40p for their paper, have a flutter on the Lottery and maybe pick up some chocolate or a drink.”
Conrad says that regardless of whether we are out of the recession, people’s shopping habits have changed for good and it’s important all retailers adapt to meet those changing needs.
“I believe we offer consumers good value. We have a Payday deal product every month. We’ve had 1.75ltr Coke for £1, which still gave us a good margin. We’ve also had nine-roll triple Velvet for £2.50 and Carlsberg 500ml four-packs for £3.20. These deals fly out. We’re limited to the numbers we can buy so I just buy the maximum I’m allowed.
“We’re also doing ‘baby products at baby prices’. Blakemore trialled this and we’ve just piggybacked on that. We pricematch Asda on all formula milk and nappies - our margins are down, but our cash profit is up. Baby products were not a big seller for us, but as a Spar we’re a community store so I think it’s important that we satisfy young mums. Baby category sales were 30% down before we did this, but are now up by 70%. Of course, you can say that’s off a low base, but it’s still up.”
Athough Alan is keen on PMPs he says he generally doesn’t do deals. “To be honest, I’m not very good at that sort of mechanic and my till doesn’t do that sort of thing. But I do honour them - Frazzles has a flash of ‘three for a price’ at the moment and I just override the till if anyone buys three bags.
“Anyone can do a deal for a week or two,” he says, “but there are 365 days in a year and I like to offer my customers value every day of the year.”
Best-One retailer Nayan Amin in Bedfordshire says some retailers say yes to every rep just to get a good deal.
“Promotions like Link Buys work up to a point, but you can’t do them for ever as people get bored. We run a promotion, stop it, then bring it back later. If you over-offer it, you kill the brand,” he says.
And, rather controversially, he describes meal deals as ‘mundane’.
“I get asked whether we do meal deals and I always say one of our sandwiches, a packet of crisps and a drink will add up to less than any meal deal you can find down the road. We get our sandwiches from a local guy and they are really nice sandwiches that we sell for £2.09. Add that to a can of drink and a packet of crisps and it doesn’t come to more than £3.40 so I’m already cheap.
“Also not everyone wants everything that’s in the deal. Some people don’t want a drink, for instance. Pushing meal deals is what they do at McDonald’s when they try to get you to have everything, and not everyone wants everything. In my store I let the customer make the choice and there’s value there regardless of whether it’s in a deal.”
Nayan took over his store in Dunstable in 2008, just as the recession really kicked in. “When we came here, we gutted the place and refitted the store so we expected immediate growth, but we have enjoyed it for every year since then. But now the recession is meant to be over and this is the first year when sales haven’t recovered as much. Trade is usually good until Bonfire Night, then it slows down and grows again in the new year, but this year it’s been slow.”
The reason Nayan thinks his sales are down is because retailers are all fighting for a smaller piece of the pie - with a big chunk taken by internet sales.
“People have got used to the fact that they click, pay and then it’s delivered, and sometimes they don’t even notice the prices they are paying. We were doing Jack Daniels at £19.99 - a good price when the rrp is £24.99. But people were buying it online and getting it gift wrapped in a bag or a box and paying £28. We sell those bags and boxes and they could have got it all cheaper from us.”
Nayan is far from giving up, though, and is still pushing the value message. “The shop is full of PMPs; we’ve done well with them. They’ve been good for business and given us decent margins. We’ve also got some cracking ‘wow’ deals - big packs of soap powder at brilliant prices.”
You’ll also find wow deals and ‘when it’s gone it’s gone’ offers in Binny’s store. He’s a Londis retailer, but says he has to be selective about the deals he takes. Value is always highlighted as much as possible with £1 stickers and hanging signs.
Nayan says value is not just a tin of beans for 30p, but it’s things like good service, too. And Conrad says it means offering local lines: “People are increasingly interested in provenance. They know of the local producers or they might have a friend or relative who works in a local farm or brewery and want to support them.”
Their views are supported by the latest HIM research, which says the UK shopper has changed from being cash rich, time poor and moved on from being price driven, to expecting good prices and the ultimate convenience.
The research company says great prices are no longer enough for ‘Generation C’ - acceptable pricing is an expectation and today’s shoppers demand more in terms of service, quality and convenience.
Since giving up his Budgens store last autumn, Binny has spent a lot of time on the shopfloor of his Londis, finding out what his new breed of shoppers is after. “I’ve been totally focused on my customers, looking at how often they come in and what they are buying. Customer shopping habits have definitely changed, with people visiting us more often rather than doing one bigger, bulkier shop.
“Basket spend has gone up. If you’ve got offers the overall perception is that you offer value across the store and people trade up on things like treats.”
Binny has also responded to customer requests. “Customers asked for more loose fresh fruit and veg so they were not forced to buy more than they needed so we’ve provided that.”
Own label has a big part to play in communicating value to shoppers. Conrad is a big fan of the Spar brand, particularly its quality and innovation. “Their new pulled pork is absolutely fantastic; it’s good quality and I was really impressed with it. I think they are doing a good job with it. Spar brand is a very good tool for us and we get good customer loyalty through it.”
And, of course, own brand is not averse to pricemarking packs either. Out of 950 Spar brand lines, more than 350 are pricemarked or on permanent ‘2 for’ meaning that more than 40% of the range is covered by this mechanic.
Spar UK brand manager Martha Ward explains: “We have PMPs in all categories including fresh, grocery and licensed. Our pricemarked spirits are doing well where stocked, and the new products launched this year so far have, in the majority, been in PMPs such as crisps/nuts, frozen ready meals and mini ice creams. It’s important in our sector that consumers see value in store and we’re using own brand to do that.”
Your tool kit
Ward adds: “Pricemarking is a great way to catch the consumer’s eye as they browse, and it’s a useful tool for communicating value for money to shoppers, which is a key role for own brand. We also know that they help our retailers boost sales of Spar brand products.
“With this in mind, we recently introduced PMPs to our ready meals, evening meals and meal accompaniment ranges. These packs make a real statement by telling our customers they offer good value, with clearly visible pricemarks.”
Surveys seem to say that things are getting better for consumers. According to the Institute for Fiscal Studies, average income is back to around pre-recession level, which sounds good until it adds that household consumption of non-durables such as food and fuel are still below ‘pre-crisis levels’.
In his Budget statement Chancellor George Osborne said that the UK grew 2.6% in 2014, faster than any other advanced economy. But when asked whether the recession is really over yet, the retailers that C-Store spoke to were not 100% sure.
Andrew Porter of Eurospar Creightons of Finaghy says his customers are spending a “wee bit more”. “Customer spend has increased and the change we’ve seen is that customers always bought things when they were on offer, but now they are buying them at full price as well.”
Alan says that although he trades in an affluent area and trade is pretty steady, it’s still hard to tell.
For Binny, signs of an upturn are seen from the number of tradespeople coming into his store. “There’s a lot more building work going on locally and you get the feeling that people are slightly better off,” he says.
“We’ve also noticed an increase in credit card transactions. During the recession people switched to debit cards, but in the past two or three months the number of Visa transactions have definitely increased as people put things on their credit cards. That said, they are still a lot more sensible in their shopping habits.”
How different groups view their position
According to Barclaycard’s Spend Report (Q3 2014), there are four main types of spenders in Britain. They are:
Confident and affluent (13% of spenders)
Average age of 33, often couples with young children
80% are confident about their situation
Living costs are rising, but so is their income
At the time of the survey last year, 86% expected to increase their spending in the next three months
Cautiously optimistic (44%)
Middle-income and middle-aged - aged 44 on average
Relatively confident about their current financial situation
Expected a small improvement in their incomes
At the time of the survey, 41% expected to increase spending in the next three months, while 54% thought it would remain unchanged
Financially fragile (30%)
Middle aged and lower-income - aged 45 on average
Relatively less confident about their financial situation
Concerned about job security
Over the past 12 months they have cut back spending and expect this trend to continue
Stressed and cash-strapped (13%)
Older with lower income - aged 48 on average
Just 21% are confident in their overall situation
They expect living costs to increase and think they will struggle
At the time of the survey, 26% expected to decrease their spending significantly in the next three months.
74% of convenience retailers said they offer PMPs
63% said they would be more likely to stock a new product if it was sold in a PMP
37% said that availability of PMPs has a strong influence on choice of which wholesaler to buy from
78% of retailers say they pass on savings made on promotions to their customers vs 58% in 2010. This is in line with improvement in the shopper satisfaction with value for money in convenience stores (up from 8.2 out of 10 in 2013 to 8.4 out of 10 in 2014)
Wholesalers have seen a huge increase on PMP sales. In 2011 47% of retailers bought price-marked soft drinks in depot. In 2013 the figure was 93%
61% of convenience shoppers think that PMPs help independent retailers have better prices than the supermarkets
One in three adults say that knowing a c-store sells PMPs positively influences their decision to visit that particular store
30% of convenience shoppers said they would be more likely to buy a product on impulse if it was a PMP
43% of convenience shoppers said they would be more likely to try a new product if it came in a PMP.
Pricemarks reach the wine category
Last year Treasury Wine Estates told retailers about a £200m sales opportunity that they could tap into by offering a more balanced range of wines, merchandising the fixture correctly, having clear pricing and a good chilled offer.
To help retailers achieve all this the firm then launched a range of pricemarked bottles for its top-selling wine brands in the £6-£8 price bracket - Wolf Blass and Lindeman’s. These include Wolf Blass Yellow Label chardonnay and cabernet sauvignon, rrp £7.49; Wolf Blass Red Label chardonnay semillion and shiraz cabernet at £6.49; and Lindeman’s Bin 65 chardonnay and Bin 50 shiraz, at a £6.49 price point. Neck labels highlight the prices.
Shaun Heyes, head of customer marketing at Treasury Wine Estates, says: “While popular in other categories, pricemarked packs have never been a major focus for the wine category. Retailers expect PMPs to be the biggest driver of growth over the next year (HIM ) and they have been a major growth driver for other BWS categories. Some 85% of convenience wine shoppers would buy PMP wine, but hardly any are available.
“Research also shows that the rate of sale is higher for PMPs over standard packs. This, combined with the fact that wine shoppers spend more than double the average convenience shopper spends, reinforces why we chose to launch our first ever range of PMPs.”
What price credit?
Retailer Nayan Amin has a bee in his bonnet about independent retailers who charge customers who pay using credit or debit cards.
“Independent retailers may have lost their higher prices stigma but many are now seriously annoying customers by charging them if they use a card to pay,” he says.
“Some insist on a minimum spend of £5 or £10, while others charge 50p or £1, but in Tesco Express you can buy a can of Coke and put it on a credit or debit card and get charged no extra. How can we be offering our customers value if we are adding 50p or £1 to their bill? If you do it 20 times a day, you will annoy customers. People accept it, but that doesn’t mean they’re happy. I think it’s madness and it’s seriously damaging business.”
WKD result from pmps
Cheeky RTD brand WKD is enjoying great sales success with PMPs, so much so that brand owner SHS Drinks has added WKD red in 700ml £2.99 PMP bottles.
These come in specially flashed cases (six x 700ml bottles) with eye-catching neck labels. to provide standout.
WKD red joins WKD blue and WKD iron brew, which were launched in 700ml PMPs a year ago to complement the WKD blue and iron brew 275ml £4.99 PMP four-packs.
Debs Carter, marketing director - alcohol at SHS Drinks, says: “PMPs are having a big impact within the RTD category where they now account for £11.8m of the £61m-worth of RTD sales through impulse stores (Nielsen) - almost double compared with a year ago - and WKD has been at the forefront of the RTD PMP revolution.
“The fact that WKD blue PMP four-pack sales are up by almost a third and 700ml PMP sales of WKD blue and iron brew have grown by 1,157% in a category where overall RTD sales value has grown by less than 5%, demonstrates the positive impact that PMPs can have on driving sales.”
She adds: “The PMPs are not having a negative effect on retail sales revenue, either, as value sales of WKD PMPs have increased in line with volume performance.”
Premium brands get in on the act
Kettle Food says its Kettle Chips pricemarked packs are ideal for outlets in more price sensitive areas, or where the rate of sale of premium products is lower.
Its 100g bags, price-marked at £1.29, are available in the brand’s five top-selling seasonings: lightly salted; sea salt & balsamic vinegar; sea salt & crushed black peppercorns; mature Cheddar & red onion; and sweet chilli & sour cream.
The pricemarked 40g (59p) bags are now permanently available in shelf ready cases (18x40g bags), in the four most popular seasonings, to encourage trial and help retailers to maximise the hand-cooked opportunity.
This spring the 40g PMPs carry a ‘Win the Ultimate Treat’ competition, in which consumers have a chance to get their hands on hundreds of instant-win prizes - from trips to Paris, hot air balloon rides and deluxe theatre breaks, to gourmet Michelin lunches and luxury food hampers. In addition, the winner of the top prize will be able to choose their ‘Ultimate Treat’ holiday. To enter consumers simply need to go online and submit a unique code, printed on each promotional pack.
Kettle says sales of PMPs can be helped by using POS and off-shelf displays to drive consumer trial. It offers a range of free POS material, from permanent display stands to baskets and clip-strips.
AG Barr has launched what it calls the “next generation of PMPs” - those that incorporate an additional multi-buy element. The mechanic was first trialled on Rubicon 1ltr cartons which were offered with a £1.29/2 for £2 flash on pack. It has proved so successful that it now being used on Irn-bru and Barr flavours and is being repeated on Rubicon and rolled out to Sun Exotic and KA 1ltr cartons.
According to Swizzels, more than one million £1 Loadsa bags were sold last year and the brand continues to experience 27% year-on-year growth. Also available in £1 PMPs is the Squashies range of Love Hearts, Drumsticks, Refreshers and Double Lollies.
Princes has a new £1 PMP, in cases of six, along with an improved pack design for its canned peaches, pineapple, fruit cocktail, pears, mandarins and strawberries. The brand has seen value increase by 15.4% and volume up by 5.8% (IRI) over the past year.
Just Juice recently relaunched its juice range in fresh packaging with new 1ltr pricemarks of £1.29 or 2 for £2 - prices which brand owner Refresco Gerber says compete head-on with deals offered by multiples.