Consulting company Oliver Wyman, which provides services, including to large Russian retailers, recommends that retailers reduce the number of promotions in order to get rid of the risks associated with industrial dependence, Vedomosti writes.
It is no secret that with the decline in purchasing power caused by the crisis, many retail players often began to resort to various kinds of discounts in order to stimulate demand for their products. As a result, promotional campaigns reached such a level that buyers ceased to be value. In addition, customers accustomed to discounts believe that the regular price is no longer profitable. Often, retailers evaluate the effectiveness of a promotional campaign only by the growth of goods per share, experts at Oliver Wyman note, which means that side effects, for example, the effect on sales of other goods and brands and a shift in demand, are ignored. The net effect should also take into account marketing costs, additional labor costs and costs in the supply chain due to the need to handle over-volumes.
On average, according to Oliver Wyman, promotions reduced sales growth by 18% over the past five years (data based on a study of Eastern European networks). At the same time, upon reaching a critical share of promotional sales, every additional 10% increase in turnover entails a loss of 1% net profit, consultants at Oliver Wyman calculated.