Decline of multibuy mechanics, raise of subsidisation costs
/In 2015 Tesco started their “project reset”, a project that included both One Stop stores and Express stores. In a recent interview for Grocer magazine, Convenience MD and One Stop CEO Tracey Clements has stated that the retailer has removed 46% of the master range available to Express stores over the past year due to an “availability challenge”. Following a general trend in the UK, it seems that also at Tesco multibuy promotions are losing ground fast to the simpler 'round pound' ones. Pragmatism and convenience seem to be the key words when thinking about today’s shopper: “You just don’t have the time or the space to carry it, you want a simple promotion. We’re moving away from multibuys into much simpler, round-pound deals for customers that are relevant to them as convenience shoppers.”, said Clements.
However, single unit promotions, unlike multibuys, do not reward shoppers with a discount in return for an increased shopping effort. They lead to higher subsidization costs, as 100% of all sales will have a discount. Many suppliers and retailers are ignoring subsidization costs, not even measuring it. This is problematic as subsidisation costs are the biggest drain on promotional efficiency.
According to Accuris research, subsidisation can be reduced as follows:
- Require an effort from shoppers in return for receiving the deal
- Avoid single unit promotions
- Use multibuys, larger pack sizes, ladder promotions or volume-plus or value added promotions
- Promote more in large stores and less in small stores
- Target replenishment shopping trips with multibuys
- Target fill-in shopping trips with non-price promotions