Milk-Test

Grocery Retailing – A Volume Business

Grocery retailing is undoubtedly a volume business where marginal changes in shopper behaviour can have a massive impact on the balance sheet.

To use an example, some five and a half billion litres of milk are sold in the UK each year with the top 5 grocery multiples accounting for nearly three quarters of this volume.

At a price of £0.75 a litre, Tesco as the UK’s largest retailer sells over £1bn worth of milk a year to the British people. As such increasing sales by just 1% would result in a revenue uplift of around £10m.

Little wonder then that when even small changes in percentage terms are worth chasing, retailers and manufacturers spend an estimated $17 billion globally per year on in-store marketing and promotions designed to maximise their sales potential. But how can they be confident of a return on that investment?

Sure, analysis of sales data may give some clues to the impact of their activity, but only at a top line level and often times when promotions cover multiple locations in a store it is unclear what the contribution of each is to the overall uplift.

Asking shoppers about their behaviour or even standing and watching what they do is also of little value since the number of individuals that can be covered is limited and so a margin of error exists around the results which is greater than the uplift in sales that is being sought and so one can never be sure whether there has been an impact or not.

When chasing marginal percentage uplifts in sales, to deliver unequivocal evidence of efficacy requires objective results on large sample sizes and this is one area where observation of shopper behaviour en-mass through video footage comes into its own.

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