Australian shoppers are showing that the battle for value in supermarkets is becoming more complicated than simply moving customers from branded products to private label. New Circana analysis shows that 66% of shoppers are relying on supermarket promotions and specials to manage rising prices, compared with 36% who say they are buying more private-label or supermarket-brand products.
The figures reveal an important change in shopping behaviour. While private label has become one of the strongest tools available to supermarkets seeking to offer lower prices, consumers are not necessarily abandoning branded products. Instead, many shoppers appear to be waiting for those products to become cheaper through promotions.
For supermarkets, this creates a difficult pricing environment. Promotions can drive traffic and protect customer loyalty, but excessive discounting can also put pressure on margins. Private label, by comparison, gives retailers greater control over product specifications, pricing and margins.
ISN Comment: The results are a warning to supermarkets that today’s consumer is becoming increasingly sophisticated about value. A shopper may be perfectly happy to buy a supermarket own-brand product one week, but if a major brand is heavily discounted the following week, that decision can change immediately.
This means supermarkets need to think beyond the traditional question of brand versus private label. The real competition is increasingly about which retailer can convince consumers that it is offering the best value on the products they actually want to buy.
Promotional pricing is particularly powerful because it gives shoppers the feeling that they have discovered a saving. That psychological element should not be underestimated. Consumers under financial pressure are actively looking for deals, and supermarket promotions provide an immediate and visible answer.
The challenge for retailers is maintaining that perception of value without turning the supermarket into a permanent discount environment.
Australia is therefore providing another indication of where grocery retail is heading globally. Consumers want lower prices, but they also want choice. They are prepared to switch between brands, private label and promotions depending on which offers the strongest value at the moment of purchase.
ISN believes the next phase of supermarket competition will not simply be about having the cheapest own-label range. It will be about creating the most convincing overall value proposition — and being able to change that proposition quickly as consumer behaviour changes.