Price Wars Are Not A Path To Private-Label Success, Says IRI
The European grocery retail landscape is changing rapidly. The explosion in mobile device ownership has helped food shoppers become more price savvy, assisted by aggressive price wars by retailers in the market.
However, price wars are not a path to success in the area of supermarket brands, says Tim Eales, director of strategic insight at market insights firm IRI. “IRI’s own findings suggest that lowering prices may not bring about the increased sales and improved performance that retailers expect. The likely reason for this is that price is not the strongest sales lever. Evidence suggests that an expanded offering has the greatest impact on performance, followed by promotion, then price.”
Eales is the author of The IRI Private Label in Western Economies Report, which looks at private label performance across a number of European markets, and in the United States. The study highlighted that for the first time since the start of the recession there has been a slowdown - and even a decline - in some markets for private label.
Looking to France and its performance in the area of private label as an example, he says that deflation in this market has “had no impact” on volume consumption, or shifted the balance between traditional retailers and hard discounters. “In France’s case, lower prices have also encouraged consumers to reconsider and adopt national brands, reducing the competitiveness of private label,” he told ESM.
Supermarkets need to be in tune with their target consumers regarding own-brand offerings. “It’s essential for retailers to be in tune with customers and understand what drives them to the point of purchase.” Shopping habits are changing – it’s no longer about the once-a week family shop; consumers are shopping little and often, going online or relying on more convenient formats to top up, he says.
“Retailers have to reflect these changing habits by optimising product assortment and fostering greater collaboration with manufacturers to deliver the best product mix between brands and private label to increase shopper satisfaction.”
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