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Price increases are consolidating across the store with prices across most departments up 7-8% Year over Year.  According to the latest NielsenIQ research, prior to the Pandemic nearly 1 of every 3 units sold was on promotion, but during the early Pandemic promotions dropped to as little as 1 in 5 items. Retailers cut back on promotions as supply dried up and they lacked the inventory to run deals. Throughout 2021, promotions bounced back slightly from early in the Pandemic, but remained 5-10% below historical levels. In addition to promotion frequency declines, retailers significantly cut depth in 2021 to combat cost of goods increases.

Christmas Promotions

During the week of Christmas consumers paid nearly 10% more for their groceries than prior year.  The higher prices paid were driven by an accelerating decline in promotions during the Christmas week.  An almost 10% decline in promotion frequency coupled with a more than 10% reduction in depth of discount led the average price paid to rise significantly faster than everyday shelf price increases.  The price increases and promotion declines during Christmas were driven by the Frozen, Beverages and Grocery categories.

Winners and Losers

The pull back in promotions hit retailers that have been more reliant on promotions harder.  During the Christmas week high-low retailers saw their price index vs. EDLP retailers worsen by a full percentage point. 

This huge swing in price position also led to a big change in consumer behavior.  Data from the IRI Consumer Network, for the Christmas week, shows Grocery channel sales up 9% while the Mass Channel, which includes key EDLP retailers such as Target and Walmart, saw their demand rise by 24%.  The faster growth for Mass retailers means that these retailers won significant holiday share, driven by their improved Price Image.

As we head into 2022 this shifting promotion landscape will have huge implications on many retailers.  For more promotionally reliant retailers it is now more important than ever to identify their true Price Image Drivers vs. dated KVIs.  By identifying their Price Image Drivers that matter most to their shoppers, retailers can maintain promotions on these items to improve their Price Image.