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Pandemic pricing opportunities

Four price-related insights to help win in today’s market

How do you win in the retail market? It’s a challenge at any time, of course, but understanding what actions to take during an ongoing pandemic only makes things more complex.

A good idea is to start with the big picture. Canadians continue to look for savings as the pandemic persists, with 51% trying to spend less on grocery. Here are consumers’ top saving strategies:

  • 72% – stock up when on sale
  • 59% – only buy items when on sale
  • 47% – seek out stores for the lowest price
  • 47% – only buy essentials
  • 47% – buy less expensive store brand products
  • 44% – shop at specific retailers to build loyalty points
  • 42% – use coupons when shopping
  • 42% – buy larger sizes for better value

It’s worth noting that inflation is rising across the store, driven by increases in regular and promotional prices. Produce prices are up 1%, health and beauty aids (HABA) have risen 2%, refrigerated and frozen foods are up 4% each, bakery is up 6% and deli/meat/ seafood has increased by 7%. Meanwhile, shelf stable grocery has not increased at all, while non-grocery has declined 1%.

While most departments are now experiencing pricing increases, deal activity is also increasing. Are you considering pricing action? Keep in mind that price sensitivity has remained comparable to pre-pandemic levels in 74% of categories. Given all this, what’s doable? Here are four insights to help grocers figure it all out.

Insight #1: Regular price changes are possible given comparable elasticities to pre-pandemic levels. But test it first—30% of items are highly price sensitive. Meanwhile, promotional elasticities continue to decline. Canada is very deal sensitive, and consumers are buying more units on deals. One in five items is highly responsive to promo price changes. Knowing that leads to a second opportunity.

Insight #2: COVID-19 has increased the cost of doing business, leading to pricing evaluations across the industry. Now is a good time to change promotional strategies. Focus on depth of discount by item and retailer.

The pandemic has also had a major impact on supply chains. On-shelf availability of items plunged during the COVID-19 period, but in the third quarter of 2021 reached pre-pandemic levels. There are signs of supply chain recovery across the country, although it varies by category/manufacturer. That said, lost opportunities for continued out-of-stocks is high. For a third opportunity, this is the time to focus on efficiencies among suppliers.

Insight #3: Continue to support supply chain improvements to capitalize on sales. How are the items available to shoppers changing? Item availability is up versus pre-pandemic levels. The exceptions to this are HABA and non-grocery items. It’s time to take advantage of increasing availability. Understand, too, that based on sale rate alone, more than 90% of targeted delists would be the wrong items.

Insight #4: Make room for innovation, ensure the right items are replaced, and have the most efficient portfolio on the shelf. Go beyond the sales rate to include the total incremental benefit of items. You can drive growth through advanced analytics, looking at consumer sensitivity to price changes and promotional lifts, on-shelf availabilities and out-of-stocks, and assortment to meet consumer demand.

The bottom line? It’s all about having the right items in the right stores at the right prices with the right promotions.

This column appeared in Canadian Grocer's November 2021 issue.

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