Speculation over the government’s intention to ban the promotion of unhealthy products and restrict where they can be placed in stores has been running rampant for some time now but the potential impact on retailers is very real.
It has been suggested that the Prime Minister Boris Johnson is planning to prevent shops from offering promotions on targeted products while a ban is also expected on confectionery promoted at the end of aisles and entrances. The healthy eating debate is one that needs to be taken seriously but there are concerns that these measures would be difficult for convenience store retailers to swallow.
In its evidence to the government’s consultation on the issue last year, the Association of Convenience Stores (ACS) warned that any ban on promotions would create an administrative burden for enforcement agencies as well as retailers.
It said: “The competitive nature of the retail grocery market means that they are an important tool for retailers to show they are delivering value to customers. For independent convenience retailers, promotions are a way of differentiating themselves, responding to competition, responding to changing customer demand and tailoring their offer to their customer base. The promotions that retailers use in-store vary greatly, as they may be used for different reasons, and we believe it would be challenging to regulate and enforce against promotions in stores. The delivery of these restrictions would place significant costs and administrative burdens not only on retailers but also on enforcement bodies.”
As well as the administration negatives, there are also concerns that banning promotion on products would favour the larger retailers who have stronger buying power.
“Larger retailers can adapt to use alternative pricing or promotional strategies, such as ‘everyday low prices’ or using temporary price promotions in order to still comply with the regulations while using their greater purchasing power with suppliers to maintain their profit margin. However, smaller retailers do not have the same advantage of having purchasing power to price products at an ‘everyday low price’ or use extensive temporary price promotions and as a result of the regulations they could be competitively disadvantaged.”
One irony in this situation is that during the coronavirus pandemic more convenience stores are selling higher volumes of fresh fruit and vegetables due to customers not wanting to shop in the larger supermarkets. Even before lockdown, several top retailers discussed how healthy products were becoming more in demand with shoppers. With cost perception of convenience stores already quite precarious, any further tipping of the pricing scales in favour of multiples could kill off some businesses.
”You can’t expect a small shop to maintain a set distance between a wide range of products deemed to be unhealthy.”
As well as the ban on promotions, restrictions on the siting of certain foods could pose an even greater challenge for retailers with smaller stores. In a recent blog, ACS chief executive James Lowman outlined exactly how damaging this approach would be to shops from a financial and a logistical viewpoint.
“You can’t expect a small shop to maintain a set distance between a wide range of products deemed to be unhealthy, and the door, till or aisle end. How would you even start trying to design a convenience store, most of which are close to or below 1,000 sq ft, on this basis?”
The ACS suggests that shops smaller than 280 sqm should be exempt from the restrictions on location of affected unhealthy products in-store. “This exemption makes the most sense to reduce burdens on retailers as the restrictions on location of products in-store is intrinsically linked with where unhealthy products can be located. While restrictions on the location of products in-store presents operational challenges for all retailers, for smaller format retailers, this could mean that they have to overhaul the whole store layout in order to comply.”
While there is no timetable confirmed for these measures, there’s no smoke without fire particularly in UK politics and these rumours could lead to a sudden announcement by the government that could have wide-reaching implications for your business and the products it stocks.