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Why shoppers will be looking for more than just low prices from brands and retailers post-Brexit

By Matt Lee, co-founder and director

December 2, 2016 | 4 min read

It’s obvious that Brexit is having an impact on retailers and brands. However, among all of the things individuals have to worry about as a result of Brexit – house prices and currency devaluation being two of them – the price of their grocery items is unlikely to be top of the agenda for the majority of their week until they reach the actual store.

Supermarket

How much will price communications influence shoppers?

When it comes to grocery shopping, most people choose their supermarkets based on where they live and the experiences they have when they go into the store. It’s not surprising therefore that we see retailers moving away from price-led communications above the line. In fact, we expect to see more of this as retailers put a renewed focus on their USPs through their brand values.

However, that approach won’t necessarily work in store. As soon as shoppers walk into a store, and more importantly when they are at fixture, it’s the price communications that influence shoppers most at this point of purchase. It’s unlikely that we’ll see the supermarkets revert back to the brand price match strategy of 2015, as they are already being squeezed by suppliers on margin following the announcement of Brexit.

This year, supermarkets have been reverting back to ‘everyday low prices’ as they try to control the level of discounting. In fact, for the first time, market research company IRI has reported a modest reduction in discounts of -2.6% YoY, with 51.6% products sold on offer (August 2016). Though it is important to bear in mind that this means that over half of all products are still sold on deal. In fact, despite fewer products on offer, the discounts have generally been deeper than previously. Can the volume and level of deals ever be brought under control?

Retailers and brands have to find alternative ways to provide value to shoppers, rather than just lower price if they want to compete for and retain shoppers.

Ultimately it’s the store and shopping experience that matter. For retailers, an increased focus on improved services, coupled with easier ways to shop and find products, will encourage shoppers to remain loyal to them. For brands, added value can be provided through traditional means such as free gifts with purchase or competitions, as well as through a proposition that is aligned to shoppers’ needs.

It is then up to brands and retailers as to how they communicate this value with shoppers. Changes over the last six months in advertising opportunities in-store have become mostly limited to one of two types: ‘new’ or ‘price’ only. If retailers are moving back towards an ‘added value’ approach, advertising guidelines will have to change again in 2017 to allow brands to communicate alternative value add messages to shoppers.

At the heart of it, retailers and brands need to work together to offer products and services of real value to shoppers and get them to believe in the everyday price value of their products through smarter in-store communications.

Matt Lee is co-founder and director at shopper media agency Capture

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