Among the Christmas decorations, chocolates and pigs in blankets you can’t fail to notice the large number of offers and promotions for shoppers to take advantage of. So why is this so important to retailers?
The 13 weeks prior to Christmas can indeed be a time to celebrate for the UK’s top retailers. A successful festive trading season can boost retailer’s profits and see in the New Year in good cheer – this is why this period has earned its name as the 'golden quarter'.
It is reported that on average people spend over £178.57 on food and drink and individuals eat around 5,560 calories on Christmas Day alone. This all offers supermarkets a unique time of year to increase sales and leads to an intensely competitive retail market.
In the run up to Christmas we have seen retailers take a number of different tactics to entice shoppers to spend money with them.
The first of these is product innovation and value adding - there have been a range of new products on offer including lamb guard of honour with whisky and orange glaze, luxury brined whole turkeys with orange and herb butter, beetroot and kale wellingtons and golden chocolate puddings.
Customers are prepared to trade up to premium products (thus spending more) during Christmas and new product development encourages them to do this. In 2015 M&S alone launched 750 new products for the Christmas quarter.
Another draw is promotions; this year we have particularly seen retailers slash prices on fruit and vegetables. Carrots were to be purchased from as little as 19p per bag. This is a big draw for customers to come into the store to do their Christmas shop – the hope from stores is that the value of the overall basket out ways the discount on key products such as vegetables.
We have seen this strategy taken with liquid milk over a long period of time. Where a specific product is used in this way, it is vital that producers and growers do not fund these promotions and that supply chains are open and transparent.
There are a number of concerns on how long running deep cut promotions such as these, can impact the dynamics of a sector. There is the potential for shopper perception of the value of fruit and vegetables to decline due to the low purchase price and for the eating habits of shoppers to change, due to making changes on what they purchase due to promotions eg buying green beans rather than broccoli.
Over the coming months we will be looking to further understand the impact of deep cut promotions on producers and how retailers performed over the Christmas period.