Jo Smith: "Retailers are revisiting promotions in UK"

In the latest issue of Perspectives, we had the opportunity to talk with Jo Smith, Business Development Director UK. In this four minutes interview, she goes over three of the most topical subjects in the UK market place: online shopping, own labels and promotions.

Online has been a really important channel for the UK market, with online sales currently representing 7% of the total grocery spend. However, online growth has dropped considerably at a time when physical stores (e.g. supermarkets and convenience stores) are holding their growth.

"We could arrive to a point where the growth from physical stores outstrips that of online".

So, why is this happening? Jo Smith finds the explanation in several factors. First, shopper acquisition is harder. This channel depends a lot on the main shop and needs shoppers to commit to a minimum spend. In addition to this, top-up shopping and small baskets delivery are a challenge for the online channel. Our expert talks about Ocado's plans to deliver the top-up shopping in the UK and how that could play with Amazon being around.

"The slowdown of online might just be a short-term scenario, but it could actually reverse into the future".

Regarding own labels, discounters and bargain stores have continued to put pressure on the big four multiple grocers in the UK. Jo Smith points out that they have increased own label levels in order to be competitive and differentiate themselves.

"Growth has come not only from the standard own label price tier, but from the premium price tier as well".

She notes how interesting the dynamics between brands and own labels are. They have actually converged, and the way this will play out in the future depends ultimately on the investment that both brands and retailers give to their respective propositions.

"Brands have sustained the growth period, whereas own labels have dropped off".

A very interesting tipping point for the UK grocery market arena are promotions. Jo Smith reminds us that in 2015 sales at promotional levels were at 41%, while now that has reduced to 33%. However, she notes, if we break that down to the latest 12 weeks, we see promotional levels starting to creep in again.

"Grocery retailers are revisiting promotions in the UK".

Jo Smith belives that special offers will continue to be a weapon for retailers to differentiate and compete in the UK. However, it won't be just promotions, but a mix of more complex promotional mechanics.

Grab a cup of tea, click on the video and watch the full interview for more interesting insights into the UK grocery market place.