Morrisons announced a further round of price reductions on 2 May 2016, following the initial launch of its ‘Price Crunch’ campaign in February of this year.
The ‘Price Crunch’ initiative appears to have been popular with shoppers – Morrisons announced that its like-for-like sales grew 0.7 percent in its Q1 Trading Statement for the 13 weeks to 1 May 2016, while its market share increased by 0.1 percent from February to May (Kantar Worldpanel).
The retailer’s outlook is promising as it reports to have made a £217 million pre-tax profit in the last tax year, in contrast to its loss of £792 million the previous year.
Following the start of the ‘Price Crunch’ campaign in February, Brand View reviewed the reductions and concluded that the majority of price cuts were on grocery items. In its statement Morrisons appeared to continue to focus on everyday grocery essentials, such as cereals, rice and sugar.
Andy Atkinson, Morrisons’ Marketing and Customer Director, commented: “We continue to listen hard to customers who say they want lower prices on staples and everyday family essentials. We are continuing to cut every price we can, as we make Morrisons even more competitive and improve our customers’ shopping trip.”
Price cut analysis by category
Brand View analysed 922 products that saw a shelf price reduction on 2 May 2016, the day before Morrisons’ most recent ‘Price Crunch’ announcement.
Some 49.0 percent of the recent price cuts were on grocery items, significantly less than the 69.4 percent of price reductions on grocery items in February.
In line with its recent announcement, Morrisons focused promotions on more Ambient products in May than in February – 89.2 percent as opposed to 57.7 percent respectively.
Health & Beauty products accounted for 41.1 percent of the products reduced in price. This is a significantly higher proportion of Health & Beauty products than in February, when this category only accounted for 12.5 percent of reductions.
Six of the top ten categories with the most price reductions on 2 May were in Health & Beauty, whereas in February only one category, Hair Colourants, featured within the top ten most-promoted categories.
The Brand View category, Hair Wash & Care, had the greatest number of price cuts with 58 products reduced. More than 70 percent of these were either Pantene, TRESemmé and Alberto Balsam products.
Some 19 Pantene products, 13 TRESemmé products and 9 Alberto Balsam were reduced in price with the remaining 17 Hair Wash & Care reductions on Ayumi, Ayuuri, Batiste and Dove branded products.
Three of the most-promoted categories in May were grocery products, down from five in February. The most-promoted Grocery categories were Carbonates, Chocolate and Crisps and Snacking Nuts, in advance of shoppers’ busy summer social calendars.
In the top ten categories with the greatest number of price reductions, all items were branded.
Six weeks on, are products still sold at the reduced price?
By 15 June 2016, 71.3 percent of the products promoted in the May price cuts had returned to the original price.
The majority of products were sold at the reduced price for just under a month – 64.8 percent of promoted products returned to their original price after exactly four weeks.
Of the 159 products that remained at a reduced price during this time period, 22 were Nivea branded products. This is most likely due to the fact that many of these products are for summer use and also, in part, due to the fact Nivea is a prominent sponsor of football events and is hoping to profit from sales driven by advertising during the UEFA Euro 2016 tournament.
Are products reduced in February still reduced in price?
Some 59.6 percent of the products reduced in price in the February ‘Price Crunch’ have since returned to their original price, while 10.5 percent of products were still reduced on 15 June, as they were on 2 February.
The ‘Price Crunch’ reductions in February appeared to have lasted longer than those in May. Of the products that returned to their original price, 40.2 percent were at a reduced price for exactly 12 weeks and an additional 35.6 percent returned to their original price between 12 and 13 weeks after their initial reduction.
As of the 15 June, Morrisons had since further reduced the price of 124 products below the original ‘Price Crunch’ campaign price advertised in February. Chilled Grocery products made up the largest proportion of these further reduced products with 31 items having fallen in price.
A total of 14 products from the Hair Wash & Care category were still at the February “Price Crunch” price and 26 products were further decreased in price as of 15 June 2016.
What factors could have influenced Morrisons’ improved financial performance?
The Morrisons’ ‘Price Crunch’ campaign and increasing popularity of its online services have helped the retailer improve its financial performance.
David Potts, CEO at Morrisons, stated, “There is still much to do and our colleagues are working very hard to improve the shopping trip and save customers every penny we can.”
In its latest round of price reductions the retailer appeared to focus more heavily on Health and Beauty products than it did in February, although, once again grocery items made up the greatest percentage of reductions.
The UK launch of the AmazonFresh service in early June poses a considerable threat to many online grocery retailers, as AmazonFresh promises to be competitive on price. However, the launch is likely to be lucrative for Morrisons, as it struck a deal with AmazonFresh – hundreds of Morrisons Own Label products will be available to order from AmazonFresh in the coming months.
Although the deal is likely to give a significant boost to Morrisons’ bottom line, it could essentially cannibalise online sales from its own website. It remains to be seen how the introduction of AmazonFresh into the competitive UK online grocery market will affect pricing strategies and these type of price cut campaigns moving forward.
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