Soaring inflation and price rises are hitting consumers’ purchasing power hard. As a brand owner or store, you need to stay on your toes so as not to lose customers when wallets get thinner. Investing in promotional prices and good offers is the right way to go. So says Ulf Mazur, founder of Matpriskollen.
Inflation is soaring, interest rates are rising and energy prices are going up. In July, inflation stood at eight per cent – a figure few in the industry have experienced before. Ulf Mazur, founder of Matpriskollen, follows the rate of inflation and price rises in grocery retail with great interest. In June, he held a seminar where he presented a survey Matpriskollen had carried out among just over a thousand consumers across Sweden to get an indication of how they will behave when times get tougher.
One of the questions in the survey was: “If you have, or come to have, a need to save money, what are the most important measures you and your household would take to reduce your costs over the next 3–12 months?”
“The answers showed that people start by cutting back on driving, buying clothes, and leisure and entertainment. But in fifth place came ‘cutting back on food costs’,” says Ulf Mazur.
In the next question, as many as 83% said they would look harder for promotional products and reduced-price items. Suppliers and retailers must pay attention to this and take advantage of it, says Ulf Mazur. The strategy of cutting back on campaigns and marketing when times get harder is not a winning concept.
“If we look at the huge development in shelf prices generally, promotional prices are now becoming even more important to customers. This is when they are really looking for good prices and coupon offers to hold on to their money and get more for it.”
As purchasing power declines, consumers will also become increasingly unfaithful to their “old familiar” stores and look for the stores with the best prices and offers, Ulf Mazur believes. This is also an incentive for stores to review what they offer.
“Of course, an attractive store with well-organised shelves and a good range combined with good service is always important. But that won’t get you all the way if shopping there is too expensive. Because when wallets get smaller, it’s even more important that the store has good, competitive prices.”
That is why, as a store, you need to work on attracting people with good offers and campaigns, and then have a good price level in relation to the store’s various added values and competitors’ prices, says Ulf Mazur.
“Not everyone can be the cheapest at everything, but price will become even more important going forward.”
Make the most of your campaigns and highlight them clearly so that consumers experience that special joy of buying and feel they are getting a good deal, advises Ulf Mazur, who ends with a piece of advice each for suppliers and stores:
“As a supplier, you must keep activating the market with your products. Campaign offers, ideally with coupons, are by far the most effective way to do that. That applies to existing products, but is at least as important for new ones. With less money in their wallets, consumers are not as willing to try new things, so a strong purchase trigger is needed.”
As a retailer, you need to focus even more on campaigns and on making your customers feel they have got a good deal – a feeling that they have found a real bargain.
“It’s when they get that shopping experience that they come back. Coupons, price reductions and high-volume displays play an important role there! Why not get help from your suppliers to create displays that stand out and sell?”
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