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2/20/2023
Retail
Article
Smaller Package Sizes and Higher Prices: Buying Behavior is Changing
Changing package sizes to charge the same or even higher prices is not only criticized by consumer advocates. Norma CEO Gerd Köber finds such hidden price increases by the industry to be an annoyance, especially in times of strong inflation. Two recent surveys show that in view of price increases, many consumers are currently turning more to private labels.
Norma CEO Gerd Köber criticizes the game of changing package sizes and calls for an “honest pricing policy” instead. “Honest pricing is the be-all and end-all. I can't make the pack small and hope no one notices. That doesn't work for us,” the manager, who has run the discounter for more than ten years, told Lebensmittelzeitung.
This also applies to private labels, an area where Norma has already experimented with package sizes, but quickly stopped again. Regional products at discount prices are also in high demand as alternatives to branded goods. In the cases of these items, it was evident that manufacturers tend to charge moderate price premiums compared to the major brand suppliers, the manager said.
The discounter has a lot of customers with limited budgets. “If you offer butter for more than 3 euros, that is too expensive for many customers,” Köber said. The reluctance to buy organic goods was also noticeable, he said. If limits were exceeded, the customer would switch to cheaper items. Many retail companies were reacting to the inflation with extremely low promotional prices for brands. “The aggressive pricing does not go hand in hand with the normal price increases in the range. That's where retailers are mercilessly foregoing margins,” said Köber. The discounter therefore specifically selected items for the promotional business with which money could also be earned.
For the current fiscal year, the retailer particularly wants to keep an eye on the increased energy prices. “This is a huge issue. Five years ago, there were discussions about which lighting concept to implement. Now every kilowatt hour counts.” To this end, processes in stores and logistics are being analyzed. Norma also wants to spend money on more efficient lighting. In view of increased costs, the investments paid for themselves within a few months.
Inflation is a concern
A survey conducted by the opinion research institute Yougov on behalf of the management consultancy Simon-Kucher & Partners also confirms this: inflation is causing consumers to turn more to private labels and low-priced store brands. According to the survey, there are plans to cut back on the purchase of new clothing (58 percent) and on spending on vacations and leisure activities.
The new study “Sustainable Consumption – For Better or Worse?” by ECC Cologne concludes that cutting back on consumption and saving also has an impact on sustainability. Discounters can benefit from this. 58 percent of those surveyed said that a sustainable lifestyle was difficult to reconcile with current price increases. As a result, 30 percent said they would increasingly refrain from buying sustainable products. However, around 50 percent of 18- to 29-year-olds said they would want to buy more sustainable products once more if prices fell again.
Price increases slow down the trend
If consumers are asked who is responsible for shaping a sustainable future, the manufacturers and industry sector takes first place, closely followed by politics and retail. A perception that certainly steers purchasing decisions and brand image and entails various options for action, say the study authors. For example, retailers and manufacturers could send clear signals in the direction of sustainability by avoiding plastic packaging and providing transparent information on materials, origins and ingredients.
“Retailers can no longer avoid actively including sustainability in their business model – those who don't do so now will lose the consumers of the future. Because for young people, sustainability is not just the way they consume, it's a way of life. This pertains to all levels: ecologically, economically, and when it comes to social issues,” recommends Julia Frings, project manager at ECC Cologne.
This also applies to private labels, an area where Norma has already experimented with package sizes, but quickly stopped again. Regional products at discount prices are also in high demand as alternatives to branded goods. In the cases of these items, it was evident that manufacturers tend to charge moderate price premiums compared to the major brand suppliers, the manager said.
The discounter has a lot of customers with limited budgets. “If you offer butter for more than 3 euros, that is too expensive for many customers,” Köber said. The reluctance to buy organic goods was also noticeable, he said. If limits were exceeded, the customer would switch to cheaper items. Many retail companies were reacting to the inflation with extremely low promotional prices for brands. “The aggressive pricing does not go hand in hand with the normal price increases in the range. That's where retailers are mercilessly foregoing margins,” said Köber. The discounter therefore specifically selected items for the promotional business with which money could also be earned.
For the current fiscal year, the retailer particularly wants to keep an eye on the increased energy prices. “This is a huge issue. Five years ago, there were discussions about which lighting concept to implement. Now every kilowatt hour counts.” To this end, processes in stores and logistics are being analyzed. Norma also wants to spend money on more efficient lighting. In view of increased costs, the investments paid for themselves within a few months.
Inflation is a concern
A survey conducted by the opinion research institute Yougov on behalf of the management consultancy Simon-Kucher & Partners also confirms this: inflation is causing consumers to turn more to private labels and low-priced store brands. According to the survey, there are plans to cut back on the purchase of new clothing (58 percent) and on spending on vacations and leisure activities.
The new study “Sustainable Consumption – For Better or Worse?” by ECC Cologne concludes that cutting back on consumption and saving also has an impact on sustainability. Discounters can benefit from this. 58 percent of those surveyed said that a sustainable lifestyle was difficult to reconcile with current price increases. As a result, 30 percent said they would increasingly refrain from buying sustainable products. However, around 50 percent of 18- to 29-year-olds said they would want to buy more sustainable products once more if prices fell again.
Price increases slow down the trend
If consumers are asked who is responsible for shaping a sustainable future, the manufacturers and industry sector takes first place, closely followed by politics and retail. A perception that certainly steers purchasing decisions and brand image and entails various options for action, say the study authors. For example, retailers and manufacturers could send clear signals in the direction of sustainability by avoiding plastic packaging and providing transparent information on materials, origins and ingredients.
“Retailers can no longer avoid actively including sustainability in their business model – those who don't do so now will lose the consumers of the future. Because for young people, sustainability is not just the way they consume, it's a way of life. This pertains to all levels: ecologically, economically, and when it comes to social issues,” recommends Julia Frings, project manager at ECC Cologne.
