In April and early May, everyday prices rose 166 basis points while the average price paid rose 220 basis points. Average prices paid continue to rise faster than everyday prices as promotion frequency remains near all-time lows. Promotions continue to disappear as frequency declined an additional 10% year over year in May. The few promotions that remain are less attractive, promoted prices are +5% higher than prior year.
Price Inflation Insights
Total store Fast Moving Consumer Goods (FMCG) prices are up low single digits year over year. Price increases are broad-based with all major departments up 10-12%, led by Perishables. At the Category level Frozen Food, General Merchandise, Fresh Bakery and Home Cleaning are leading prices higher.
Promotions are declining across the store; the largest declines are in Frozen where frequency is down almost 30%. Promotions are priced 3-8% higher vs. prior year with the largest promoted price increases in Drinks where prices are 15% higher than previous year.
Market Share Winners
According to the latest research from the IRI Consumer Network, the Mass Channel is winning share from other outlets. Mass sales year over year are up 11.5% vs. a 7.3% gain across all outlets. Club, Drug and E-commerce are losing share.
Mass retailers, including Walmart and Target, are significantly improving their price position year over year. As consumers look for ways to combat inflation challenges, Walmart has improved their price position by nearly 200 basis points and Target by over 60 basis points. How are they doing it? By reverse engineering price zones we can see the granular market level investments retailers are making. Walmart as an example is being very surgical at a local level in how they are investing in price.
To compete on price while maintaining a strong balance sheet retailers need two key things:
- Retailers need highly accurate, real-time localized competitive insights so they can monitor competitors pricing actions. Leveraging Engage3, retailers can utilize real-time store-level competitive data to track local market conditions and identify where they are over and/or under priced.
- Retailers also need to understand the key items where they must win on price and where they have price increase opportunities. As new cost increases are constantly coming in from suppliers, retailers can leverage Engage3’s Price Image Elasticity to quantify the impact of price changes to determine which items to pass on cost increases and where they should hold the ground. This information enables retailers to quickly identify investment areas and margin opportunities. Unlike traditional elasticity, Price Image Elasticity also measures the impact of price changes on shopper price perception to ensure that your price changes aren’t costing you shoppers.