In promo-crazy Belgium, discounts are, unsurprisingly, on the rise. 58% of Belgian consumers identify themselves as obsessed with promotions, while 51% consider themselves very price sensitive: they know the prices of their products and notice when those prices change. In fact, 41% of Belgians claim that they actively look for and buy products on discount.
And there are multiple reasons for this. Inflation is on the rise in Belgium, reaching 1.8% in October 2016 – and is relatively higher next to its neighboring countries (FR +0.4%, LUX +0.4%, DE +0.8%, NL +0.1%). According to Nielsen’s Q3 2016 Consumer Confidence Index, 54% of Belgian respondents have recently changed spending habits to save more.
As hard discount matures in Belgium, the arrival of new competition (low-end retail), the Ahold/Delhaize merger, and new shopping (saving) habits all contribute to create a perfect storm for promotions: low/fair price perception remains crucial for retailers as a reliable traffic driver.
Using this logic, the retailer or manufacturer should increase promotions and the happy shoppers will purchase more products, right? Wrong.
Though promotional discounts within FMCG have increased by +3.5% within the past year, this deeper increase in promotion has no real positive impact on volume sales. In fact, Belgium’s promotional ROI is amongst the lowest across neighboring countries – with only 30% of promotions delivering incremental value.
Furthermore, Nielsen research shows that in 2015, of all the promotional volumes that were sold, 82% were sold with rebates up to 20%. The problem with this formula is that those levels of rebates just balance out the price inflation that Belgium has experienced over the past ten years (19.9% according to the Health Index 2005-2015). These types of rebates are becoming standard and expected -- and no longer drive additional volume sales nor turnover.
Based on these findings, increasing promotions does not equate business growth; however, simply de-escalating promotional activity also doesn’t seem to be a winning strategy. *
Nielsen recommends optimizing your promotional return on investment by:
Where do you start? Contact Nielsen Belgium for more information.
*Nielsen European promotion analysis