Earlier this year I talked about how the move to full dollar pricing was being adopted by key retailers around the world. Full dollar pricing, or single-price retailing, came from retailers working with major manufacturers as one of the tools to shape a less cluttered, clearer and simpler shopping environment.
In the US, Wal-Mart, Target and Kmart have moved to large pricing signs to highlight great deals. In Australia this is most evident in the new format Coles store in Chatswood, NSW and Target in Geelong, Victoria.
We saw it in DVDs across the Christmas 2008 period and then in food early in 2009. Where it wasn’t possible to achieve a compelling full dollar price point on a single item, retailers worked with manufacturers to bundle one, two or three items to achieve the price point.
Often they would bundle up their own brands with relevant fresh product, or bundle manufacturers’ brands with fresh product, so we’d see Ritz crackers with the retailer’s own brand French onion dip to hit a $4 price point.
This has led to great deals, clearly marked and with minimal price ticketing. The whole effect for the grocery and mass merchant shopper was less clutter and an easier decision making process. Sales results coming through from the major grocery chains, as we have all seen, have been strong around the world.
Doubtlessly, part of this growth has come from happy shoppers enjoying this shift to crisp, clean and simple to see and understand pricing.
However, as whole dollar pricing is only one of the tools in the retailer armoury to improve the shopper experience, it’s hard to isolate this one part in the retail marketing mix.
Now a UK retailer – in fairness, born way before the GFC created a significant opportunity to attract shoppers to well priced and displayed deals – has evidenced growth rates that are truly amazing, all built on very cheap items communicated via full pound pricing.
During the GFC UK retailer Poundland has doubled annual pre-tax profits on the back of sales growth to nearly $A1 billion. It achieved these sales through a network of 250 stores, with plans for another 40 in 2009/10.
The entire offer is based upon single pound price points for single SKUs (items) or bundled offers. The shopper environment is perfectly aligned to the offer, with hand-written signs shouting “cheap” and “deal” and “great offer.”
The ranges of items are bizarre and bazaar at the same time, achieving that nirvana of shopper experience – the right products retailing in the right environment. Cheap products in chic surroundings doesn’t work; chic items in cheap environments doesn’t work. Those mixtures just unnerve and confuse shoppers. Not convinced?
Many mainstream shoppers on the UK high street will happily shop at Asda, Marks & Spencer and Poundland. They buy products that they feel are right in each of the shopping environments they visit. None of these retailers are in true “competition” for these shoppers because these shoppers expect different products and different experiences from different retailers.
In the case of Poundland, whilst its model is able to prove the full dollar pricing model, it doesn’t do the uncluttered, clear and simple environment being pursued by the grocers.
As the year proceeds, and we move closer towards Christmas 2009 and New Year sales 2010 (that will be the most important litmus test period for official calling of the end of the GF), expect to see many different models being trialed to woo shoppers to visit – and stay.
In his role as CEO of CROSSMARK, Kevin Moore looks at the world of retailing from grocery to pharmacy, bottle shops to car dealers, corner store to department stores. In this insightful blog, Kevin covers retail news, ideas, companies and emerging opportunities in Australia, NZ, the US and Europe. His international career in sales and marketing has seen him responsible for business in over 40 countries, which has earned him grey hair and a wealth of expertise in international retailers and brands. CROSSMARK Asia Pacific is Australasia’s largest provider of retail marketing services, consulting to and servicing some of Australasia’s biggest retailers and manufacturers.
Smart Company is a sister publication to The Mandarin, catering to Australia’s entrepreneurs, small and medium business owners and business managers.
