One of the key areas of promotional activity that drives sales in grocery, or any high volume, low margin retailing, is straight out deep discounting and purchase-with-purchase mechanics.
Mechanics such as “50% off” and “Buy one get one free” all work. What they do for core loyal shoppers – shoppers who know and love the brand – is allow them to buy more than they normally would, but were going to buy anyway, leading to “pantry build”. This is where the shopper puts the extra product into the pantry and so doesn’t buy again at the stores for several more purchase cycles, weeks or months.
We’ve all looked into our own pantries and thought: “I now have enough peanut butter/bars of chocolate/tinned tuna to last a year. I’ve become a pre-Zombie Attack, Armageddon, Doomsday Prepper without even knowing it!” It generates a spike on the sales graph, and then a long tail sales drop until the pantry has been emptied.
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This mechanic kind of works in higher value purchases in the fashion sector too with shoes, jeans, jocks, socks, T’s and tops also benefiting.
However, in the world of international online retailing we are seeing a similar behaviour, with higher priced items being multi-bought, but with the emotional drive being the spreading of shipping costs.
Over Christmas a friend of mine went shopping for himself at a Melbourne sports store for a specific brand of soccer boots. He’s bought the brand for years, because they fit and he trusts them to work on hard and soft surfaces and not blister his feet. Classic male “efficacy” brand factors that make men the least adventurous but most loyal brand shoppers.
The pair he wanted were $A250. He went online and saw the same pair in the UK for less than half the price, but shipping costs were around $A45. Still cheaper, but not as great a saving. So he took the decision to buy two pairs which, including shipping, still cost less than buying one pair in Australia. Now that decision has probably taken him out of the soccer boot purchase cycle for two seasons; one and a half at least. He has pantry stocked his sports locker.
Whilst the number of items that are much cheaper on international websites continues to drop, as a function of better local pricing in Australia and the weakening of our Aussie dollar, there are still pockets were it makes sense to shop and ship internationally. Pantry stocking of higher priced items to offset the shipping costs will become more prevalent as the Aussie dollar continues to weaken.
Kevin Moore is a retail expert and the chairman of Crossmark Asia-Pacific Holdings.