There was a time when customers would pay a little more for something a bit special – like organic produce and food – for example. However the is a certain law of ‘retail gravity’ that states that every product will decrease in price as it matures and moves down the retail food chain (excuse the pun ) from niche retail to the mass market.
So it is not surprising, now that you can find more organic products in a Coles or Woolworths store than a specialty store, that customers are showing resistance to high priced merchandise and flocking to join the ranks of the private label shoppers.
Australia has one of the lowest market shares in supermarkets for private label goods and you can expect above average sales growth in that sector as we play catch up – and organics will be no expectation.
There seems little doubt that shoppers have a better understanding of the benefits of organics – but at the same time they are increasingly bombarded by health warnings, healthy food messages and discount vitamins in pharmacies. So how much better are organics – and why should they pay more for them?
I have a feeling we may we moving out of the Pre-Organics stage to Post-Organics – which simply means that organics have gone mainstream and we are seeing the beginning of a huge move to a healthier ‘everything’. While the purist will be debating the merits of organics and bio-dynamics – millions of shoppers are looking for a healthier lifestyle – within their normal budgets.
If you have any doubts about that consider the demise of Macro Wholefoods as a retail concept since Woolworths bought them. You will now see the Macro brand on the shelves as a private label range.
Shortly before Macro Wholefoods was sold to Woolworths they raised their already premium prices – hardly a move that would attract a whole lot of new shoppers! The more I think about ‘retail gravity’ the more I believe retailers don’t understand its effects.
We are entering an interesting era when the prices of pretty much everything in retail stores in Australia is falling, in real terms and even including inflation. It is a much more fundamental shift than pure discounting and price promotion – is a time when we need to consider how to manage and work with this force of gravity which is as powerful as the one discovered by Isaac Newton.
Retailer seem to be suffering more than usual as a result of customers delaying their spending until sales and special offers come around ( which is all the time!) – but there may be a more fundamental trend behind this phenomenon and it may be Retail Gravity. Zara and Gap announcing their entry to the Australian market would seem to be in line with this trend in the Australian retail fashion industry.
So in the food sector I believe there is life after organics – and it won’t look much like life before organics – and I think I can predict that we will all be far healthier for it.
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