In February this year, Sainsbury’s became the first UK supermarket to announce the end of “Buy One, Get One Free” deals, thereby bringing to a close a trend which has become a commonplace in the UK retail scene. Many industry insiders have claimed that the move was made in anticipated response to a report from the Competition and Markets Authority, and it was forecast that other big retailers including Tesco would follow suit.
A recent article by Howard Langer of dunnhumby suggested that as many as half of items on sale in supermarkets would be discounted in some way, and also made the surprising revelation that 67% of trade promotions do not even break even – which loosely speaking would suggest that at any one time, a third of the items on supermarket shelves do not make a profit. In an environment where square feet of shelf space are fought over tooth and nail by the biggest FMCG brands, this is quite a shocking statistic.
In the case of perishable goods, such as fruit and vegetables, the idea of last minute discounting or ‘buy one, get one free’ sales makes sense, yet BOGOF deals were rarely applied to these categories, with confectionery, snacking, soft drinks, household and cosmetics being the main areas such deals were applied.
Naturally part of the rationale rests in the fact that consumers can be relatively fickle, and so therefore a loss-leading promotional campaign can engage new customers and develop loyalty which will remain once the promotion has come to an end. On the flip-side, however, there’s also the chance that consumers will simply shop around for the cheapest deal regardless of any brand associations, with the mindset of “washing powder is washing powder, right?” In the latter scenario surely manufacturers are cutting off their noses to spite their face – spending millions on advertising to build brand equity to then go and damage that by giving one unit away for every one sold, or discounting heavily.
Granted, spends are up – the Government’s Money Advice Service estimated that each individual spends £1274 more than they would do otherwise as a result of BOGOF offers and similar – yet what have they done to brands and their respective place in the market? Have they been affected in a particularly bad way? Will the absence of promotional marketing such as BOGOFs simply lead to more goods simply being discounted? – Naturally working in the FMCG space, these are topics I’d be keen to hear your thoughts on!