Retail analysts give Produce Business UK the lowdown on Waitrose’s personalised Pick Your Own Offers initiative, looking at what it might entail not only for the upmarket grocer, but also the wider retail scene
Analysts have long speculated about what drives consumer shopping decisions, studying product appearance, location, display and much much more besides in an attempt to unlock the secret formula that would persuade visitors to spend more during each trip to their stores.
But in the cash-conscious times of the last few years, it has often been argued that visitors to supermarkets now shop primarily on price, and that one of their first ports of call in store is items on promotion. Wise to that, of course, grocery retailers have focused on offering a wider selection of discounts and price-led promotions, some more subtle than others.
The latest, and perhaps most inventive of these is Waitrose’s Pick Your Own Offers promotion, which allows myWaitrose loyalty cardholders to receive a 20% discount on their own personal choice of 10 items from a selection of 1,000 products at any given time. Cardholders receive the additional discount on top of the existing Waitrose Brand Price Match scheme, which matches Tesco prices on branded goods.
Waitrose says it has more than five million loyalty card members and estimates that 70% of its total sales are now made to myWaitrose cardholders. So this offer is no small beer.
In a statement issued at the time of its launch, Waitrose managing director, Mark Price, hailed Pick Your Own Offers as a “ground-breaking move” that will give customers more control. “Different forms of personalised marketing have been around since the 1990s, but we’re introducing mass customisation in grocery,” he says. “Customers can choose what’s valuable to them when they shop for groceries. We really are giving power to the consumer.”
According to a Waitrose spokeswoman, the promotion, which was developed following two trials, in response to customer demand for personalised deals, will run indefinitely. “We’ve learnt since launching our myWaitrose scheme that customers like personalised deals and offers and this initiative adds to that distinctive position by capitalising on the popularity of myWaitrose and aligning our promotions with what customers want,” she says.
Customer feedback has been very positive, she says, adding that Waitrose is working on the offer as it goes along, and adapting and refining it where necessary.
Differentiation strategy
But will the promotion have the desired effect? Initial signs are as positive as the feedbnack. Waitrose claimed that the Pick Your Own Offers scheme helped increase provisional divisional sales by 2.3% for the week ending June 20, compared with the same period a year before.
Others are not so convinced. Retail analyst Steve Dresser from Grocery Insight argues that although Pick Your Own Offers looks to fit well with Waitrose’s loyalty scheme, it requires customers to log in and select deals online before heading to the store, which could be a bridge too far for many.
Dresser predicts that while Waitrose’s sales are largely insulated from the threat of the discounters, the Aldi model of simplicity and low prices “without messing around online” would still win through for many supermarket shoppers. “If anything, the move is laudable from a technology viewpoint but the reality is that it’s just another promotion for Waitrose and will cost them margin at the shelf edge,” he argues.
David Gray from grocery retail analyst Planet Retail says there is also little evidence that Waitrose’s larger rivals are poised to react with similar promotions of their own. Over recent years, the so-called Big Four UK supermarkets (Tesco, Sainsbury’s, Asda and Morrisons) have invested huge sums in launching their own discount brands to counter the threat of Aldi and Lidl, and win back previously loyal customers. “I’m not sure if the other retailers will follow suit [with Waitrose] because the trend has been towards simple price reduction,” says Gray.
For Waitrose, Gray believes the promotion is all part of an ongoing strategy to differentiate its offer from larger competitors and better tailor deals to its customer base. In fact, he views it as a clever strategy for increasing membership of its loyalty card scheme and gaining greater volumes of customer data. However, he says the cost of offering 20% discounts will be significant for a retailer experiencing declining profits.
He also points out that for all the hype surrounding its novelty, Pick Your Own Offers is not the only promotion of its kind; Sainsbury’s Nectar loyalty card scheme already allows customers to select their preferred deals.
Smart move?
Priya Chandarana, from fellow analyst IGD, believes the promotion is a smart move to encourage customer loyalty, which is likely to be well received by shoppers. The scheme, she argues, also provides scope for Waitrose to re-engage shoppers in the autumn when they will be able to pick different, seasonally appropriate, products for personalised promotions.
And Neil Mason, head of retail research at Mintel, also views Pick Your Own Offers as being a good development in lowering the cost of the shopping basket for consumers. “The promotion is more targeted towards what the consumer regularly buys and the precise savings will vary depending on the price of the items chosen or how regularly they are bought,” he says. “Waitrose has potentially taken this step as a way to tie consumers into their loyalty card programme as well as offering greater perceived value to their customers.”
As well as signing up more customers to the loyalty card scheme, Mason believes the promotion will enable Waitrose to monitor shopping habits more closely, adding that increased loyalty could offset some of the costs of running the scheme. The impact that all of this will have for the grocery sector, he believes, is that it will make Waitrose more competitive from a price point of view.
Despite all the number-crunching that precedes an exercise like this, Waitrose will inevitably be waiting with a certain amount of trepidation to discover the upshot of its innovative approach. One buyer told us: “It’s pretty clear that we can’t be 100% accurate with any predictions of how this promotion will be used [by customers] at this stage, but we’re all pretty excited to see how it pans out. It’s going to be an interesting period as we wait to see what happens.”
