Tesco raised its full year profit outlook after reporting first half sales growth of 2%. Online sales grew 8%, revenue from its premium Finest range rose 9%, and underlying profit increased 6.5%. These are results from one UK retailer. They do not establish a pattern for every market, but they challenge the assumption that pressure on household budgets removes appetite for premium products.
Value conscious shoppers are not automatically looking for the cheapest item!
Tesco raised its full year profit outlook after reporting first half sales growth of 2%. Online sales grew 8%, revenue from its premium Finest range rose 9%, and underlying profit increased 6.5%. These are results from one UK retailer. They do not establish a pattern for every market, but they challenge the assumption that pressure on household budgets removes appetite for premium products.
An overall sales figure can hide very different customer choices. Some shoppers may trade down on everyday items while continuing to pay more for a product they trust or see as worth the price. That is why buying decisions need to be made at category and product level, with attention to sales, margin, availability and the rate at which stock is moving.
A good range gives customers a credible entry price and a premium option with a clear reason to pay more. It also protects the basics customers return for, with replenishment that keeps key lines available. If a retailer responds to every slowdown with a blanket promotion, it can give away margin on products customers would have bought anyway while missing the products that still have room to grow.
That calls for discipline in open to buy and replenishment as well. An attractive premium line can lift sales, but only if depth is matched to demand and slow stock is not allowed to build up. Read sell through and replenishment signals before placing another order.
The question for buying teams is where customers are still willing to trade up, and what proof they have before adding more stock or extending the range.
When household budgets tighten, would you cut prices across the range, or protect the premium lines customers still choose?
#Retail #Merchandising #AssortmentPlanning #CustomerBehavior #PricingStrategy