Supermarkets Can Benefit From the Back-to-School Spending Boost
This back-to-school (BTS) season, consumers are downtrading to save money. Downtrading can be many different things, including buying more private label, switching to a less-expensive retailer, buying more items on promotion, and/or looking for volume discounts to save money.
Regardless of how it’s defined, consumers are looking for value, even if the impacts of inflation are less pronounced than the previous two BTS seasons. As consumers look for value, they are increasingly less loyal to individual retailers and open to finding value anywhere.
[RELATED: Summer Focus Switches to Back-to-School Shopping]
BTS Pricing Strategies Aren’t One-Size-Fits-All
BTS is a uniquely challenging event for retailers to plan for because it’s highly localized, as the school start dates differ from state to state. Adding to the chaos of BTS planning are tax-free holidays in some states that offer consumers a chance to spend on BTS items without having to pay any sales taxes. As one can imagine, these tax-free holidays can lead to spikes in sales.
Having an analytics-informed localized pricing strategy is critical to succeeding during BTS. Because the timing, location and competitors all vary by location, retailers can’t build winning BTS pricing strategies with a one-size-fits-all approach. The ability to leverage data-driven pricing can help retailers plan, forecast and execute the best strategies with surgical precision across a challengingly diverse BTS landscape.
The decision to grow sales during BTS via lower pricing or extra promotions differs by retailer and by products. The best approach for most retailers is to stay true to their brand while leveraging the right analytics to find opportunities to drive optimal results.
For retailers that are heavily invested in their EDLP (everyday low price) strategy, it may make more sense to lower pricing to meet the needs of BTS consumers. For “Hi-Lo” retailers that build demand and price perception via a heavy promotional strategy, it makes sense to continue that approach for BTS.
Promo Strategies Play a Key Role in BTS Success
Having said that, promotions should still play a role for all retailers, including grocers, as it is critical to offer unique value during this key shopping period. Depending on the depth of their science, data and capabilities, retailers can aim to win over more consumers with highly targeted promotions and deals.
Staying true to your brand while leveraging the best analytics can lead to the right balance of pricing and promotional actions to drive desired business outcomes that can be a win-win for shoppers and retailers alike.
Markdown Missteps: How to Avoid Them
Clearance is an often-overlooked element of a grocer’s BTS pricing strategy, but it can be the difference between a highly successful and a poor-performing BTS period.
The classic mistake that most retailers make with BTS clearance is waiting to initiate markdowns until it’s too late and demand has already waned.
The second big mistake retailers make is putting items on clearance at the same time nationally. Due to the highly localized nature of BTS, this second mistake is quite egregious — you don’t want to put a product on clearance at the wrong time in one state just because it’s the right time in another.
The third mistake is not using advanced optimization to determine the markdown offers and cadence on products. Simply offering 25% off for two weeks followed by 50% off the next two weeks might sound nice, but it could be millions of dollars away from the right discount approach.
While apparel merchants generally pay decent attention to their markdown strategies, it’s fair to say that a lot of hard goods and consumables merchants don’t spend enough effort or analytical time to drive value in this area.
Remember: BTS Can Mean Bigger Basket Sizes
BTS offers a great opportunity for supermarkets to drive traffic and increase basket sizes. Retailers with the best analytics, strategies, processes and technologies will continue to grow share during the BTS period.
