Facing a stagnant market, retailers of consumer staples have turned to aggressive discounts to drive growth. According to the Wall Street Journal, more than 50% of consumers’ purchases include markdowns!
More Discounts is NOT More Growth
Businesses in non-growth or declining growth markets understandably must find new ways to capture market share. However, offering more discounts is not a long-term strategy. As Deutsche Bank analyst Bill Smitz puts it, “When we look at some of the promotional pricing out there, it’s pretty clear someone has lost their mind.”
If consumer demand is shifting, no matter how many attractive discounts you offer you’ll never be able to increase your market share or grow revenues in the long-term. Discounts do not grow revenue or spark confidence in the market.
Pockets of Growth
Despite a decline within some sectors in the consumer products industry, there are pockets of growth, especially in organic and fresh foods. Now more than ever we’re seeing that you can’t make blanket statements about a specific industry.
So, while cereal or soda companies may be struggling to grow, makers of fresh juices or organic snacks may be thriving. Really, one must dig deeper to full understand the industry dynamics and the best path forward for your business.
Hopefully, retailers will move away from discounts and instead focus on sustainable ways to grow revenue, like expanding products and capabilities or moving to new geographic markets.