Cash-conscious shopping

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.

Bargain hunt

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.”

What next?

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.”