Competitive pricing is key, but retailers should not underestimate the importance of private label merchandising.
A new Times & Trends report from Chicago-based Information Resources Inc. (IRI) says consumer packaged goods (CPG) prices have been on a roller coaster ride over the past couple of years, spiking dramatically in 2007 and 2008 before returning to more normal levels in 2009. But according to the report, "Price, Promotion and Merchandising: Balancing the Call Between Value and Price Relief," private label price swings were even more dramatic, increasing and then decreasing even more than CPG prices as whole.
"Competition between store brands and national brands is quite intense," Times & Trends Editor Sue Viamari told PL Buyer. "National brand manufacturers want to 'win back' shoppers that have been favoring store brands over the course of the recession. Retailers want to keep those shoppers in their corner."
She added that pricing strategies will be critical during the next several months, particularly given the anticipated return to inflationary prices.
But pricing is not the only way to win over cash-strapped consumers. In an effort to meet shopper demand for value, national brand manufacturers unwilling to lower list prices until the economy shakes out have emphasized their merchandising efforts instead. As a result, IRI said, after several years in decline, merchandising activity is on the rise once again. The number of categories capturing 30 to 49 percent of their sales with merchandising support jumped to 52 percent in 2009, an increase of four points in just two years. The number grabbing 50 to 69 percent of sales with merchandising support expanded two points to 12 percent.
Although the gains were recorded across formats, the sharpest increases in merchandising activity occurred in the grocery channel, where 88 percent of CPG categories saw an expansion of activity.
"This shift is illustrative of grocers' efforts to attract and retain consumers that are actively shopping across channels in an effort to get the most for their CPG dollars," the report said.
While the number of categories that saw an increase in any type of merchandising activity shot up 24 points from 2008 to 2009 to 77 percent, the report did note significant variations in the growth of different tactics. For example, the number of categories using "price-only" actions (e.g., temporary price reductions) jumped from 53 percent in 2008 to 75 percent in 2009, while the number of categories using displays grew from 52 percent to 72 percent. Categories employing feature and display combinations increased from 50 percent to 66 percent, while those using features only actually fell from 47 percent to 46 percent.
"Though the economy shows signs of brightening," the report said, "consumers indicate that pre-planned behaviors will continue throughout 2010. The use of combined feature/display tactics will likely continue to gain traction as marketers seek to capture the attention of consumers in the home, but then reinforce the message at the store level through innovative display initiatives."
Improved merchandising will be particularly important for private label, which continues to lag behind national brands in terms of merchandising activity. Although store brand merchandising is definitely on the rise, IRI said, 60 percent of all private label categories saw below average levels of merchandising activity over the 52 weeks ending Nov. 1, 2009. And 38 percent actually saw a reduction in merchandising activity last year.
"Retailers really need to capitalize on advantages they have in the area of shelf space, circular layout and easy access to customer knowledge," Viamari remarked, citing a need to tap into all that consumer data retailers have been collecting to create more targeted marketing campaigns. "They need to harness these advantages to develop innovative and powerful merchandising strategies that will raise the bar on private label once again and bring increased loyalty today and after the recession ends."
According to IRI, proper merchandising can have a significant effect on sales. In fact, it reported, two-thirds of all categories enjoyed a 50 percent or more lift from merchandising efforts last year, while a quarter experienced lift levels above 100 percent. Categories that saw the most significant increases in volume with merchandising support last year included paper towels (211 percent), toilet tissue (199 percent), breakfast meats (195 percent), frankfurters (170 percent) and chocolate candy (166 percent).
For more information or to download the report in its entirety, visit http://www.infores.com.
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