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Supermarket price war fails to deliver for consumers and retailers alike

Friday December 19, 2014 at 3:52pm
The price war among the major UK supermarkets has cost supermarkets a massive £1.5 billion a year – yet shoppers are saving an average of just £1.56 a week, new research says. According to retail researchers IRI, real sales data collected across the UK for all major supermarkets is the strongest indicator available that the price war is having no significant impact on shopping behaviour. IRI argues that there needs to be a switch to different kinds of promotions which are not purely price-based. According to IRI, prices have been falling since April 2014 by -1.3%. But despite this continued period of price deflation, sales volumes continue to decline faster, by -2.7% for all packaged groceries (excluding alcohol) for the 52 weeks ending October 11 2014. Tim Eales, strategic insight director at IRI, says: “The price war only saves shoppers the cost of 2kg of granulated sugar. This is unlikely to make a significant impact on their weekly budgets as costs continue to rise, wages remain flat and Christmas and winter fuel bills loom. At the same time, there is no evidence that they are helping the supermarkets on their paths to growth. Instead they are hastening sales declines, squeezing profits and potentially breaking the loyalty bond with consumers that they have worked hard to build.” Eales goes on: “Continuing the downward spiral of price promotions is unlikely to keep shoppers loyal to a single store and makes them more price-sensitive than they were previously. Unless the supermarkets think differently about pricing and promotion, they will struggle to find paths to growth during the next few years.”
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