What’s price got to do with it?

What’s price got to do with it?

Capitalizing on the power of price to drive FMCG sales

Hypermarkets are falling out of favor with consumers across Malaysia. Given their large sizes and inability to offer a quick and convenient shopping experience, it’s not surprising that hypermarket sales fell 4% last year while many smaller-format stores saw double-digit gains.

To combat the shifting tide, some retailers are opting to downsize store footprint sizes, including Tesco, which will come to market with smaller-format stores after the government relaxed rules to allow foreign companies to open smaller stores.

Others, like Giant, are modernizing the look and feel of their outlets in order to provide a new in-store experience and convenience to their shoppers. They are also increasing their assortment to better serve the needs and wants of diverse customers.   

But are these the only ways for hypermarkets to rebound?

Capitalize on the Power of Pricing

We think there is room in the Malaysian retail landscape for large-format stores, and we think pricing can play a role in the recovery of hypermarkets. After all, Malaysians don’t just like a good deal. They love a good deal.

Given what we know about how sensitive Malaysians are to prices, hypermarkets should be maximizing their ability to attract large-scale consumer traffic by attracting deal-seeking consumers through alluring in-store promotions.

The upside to re-thinking long-term promotions strategies could be significant, as four out five Malaysian consumers say they make a great effort to seek out the lowest prices when they’re shopping for groceries, while approximately the same percentage of consumers say they take advantage of special promotions and sales. And when it comes to engagement strategies, more than 70% of consumers say they typically check circulars and coupons to find the right bargains.

Add to this the fact that brand disloyalty is at an all-time high around the globe, manufacturers and retailers should be aware of what inspires consumer disloyalty. Price plays a key role in that, as the top two brand-switching drivers in Malaysia are monetary factors. Nearly half (49%) of Malaysians say they will always switch brands if the product offers better value for money, and 47% will switch if products are sold on discount or through a promotion.

Promotions Work, But are they Worth the Investment?

Consumer sentiment is one thing, but actual sales are another. And when it comes to promotions in Malaysia, sentiment aligns with behavior. Across FMCG, 22% of sales in the 12 months leading up to April 2019 came from the sale of items that were being sold at a discount. And price promotions are good motivators across categories, as the top promoted categories in Malaysia range from laundry detergent to ice cream to dry pasta and coffee.

Promotions are not a universal solution across the store, however. Globally, 67% of promotions aren’t worth the investment. Said differently, more than two-thirds lose money. So it’s critical to evaluate whether a category is price sensitive before setting a discount in motion. For example, manufacturers aren’t likely to recoup their investment setting up special price promotions for razors, toothpaste and facial cleansers. These categories would be better served by complementing them with free gifts or packaging them into multi-packs.

Promotions are a great way to win a consumer’s share of wallet—if they’re executed properly. Understanding the expected returns associated with a promotional effort should always be the first step in the consideration process. Price sensitivity, timing and depth of promotion will illuminate whether a category is a good promotion candidate. And once a promotion is in play, measuring its effectiveness is an ongoing process.

Evaluate, adjust and evaluate again.


The insights in this article were derived from the following sources:

  • Malaysia Shopper Trends 2019
  • Nielsen Global Consumer Loyalty Survey 2019
  • Nielsen Scantrack