A Pakn Save supermarket offering household staples for 50c each is deploying an effective strategy to gain market share but its likely to be a loss-leader, retail experts say.
Pakn Save Hastings, which earlier this year was selling tomatoes for 9c a kilogram, this week has canned tomatoes, beans, pasta, laundry powder and tooth brushes and other basic products for 50c cents in its aisle of value.
A post about the sale on Pak n Save Hastings Facebook page garnered 1700 comments in less than 24 hours
Foodstuffs spokeswoman Antoinette Laird said the supermarket said the co-operative model of the supermarket company allowed individual store owners to set up their own prices and to negotiate directly with suppliers.
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This flexibility means Pak n Save stores can also snap up local deals when they come their way, she said.
Pak n Save Hastings was approached for comment but referred all media requests back to head office the national communications team.
AUT senior lecturer in marketing Dr Megan Phillips said, to be in the aisle of value, companies would normally pay the co-operative a fee of $500 or $600, and offer the product at a discounted rate so that the supermarkets could add a margin.
But she said, in this case, it was unlikely that the manufacturer could provide a discount deep enough for a margin to be added within the 50c. It does seem likely that this is a loss leader at 50c.
Pak ‘n Save Hastings has dropped the price of its sale items to 50 cents.
She said supermarkets biggest challenge was getting people in the door, so Pak n Save would have opted for the strategy hoping it would attract shoppers who would then also buy higher-margin items.
First Retail Group managing director Chris Wilkinson said businesses offered these kinds of specials for market share.
It is also about the wow factor. You can spend a huge amount of money on local advertising but doing these kinds of specials creates consumer conversations. Its something people dont expect to see, Wilkinson said.
The products on offer were all basic items, but it would still draw customers in, he said.
Offering significant deals also attracted regional shoppers.
You will find that people traditionally do trips from the southern Hawkes Bay up into Hastings for those big one-off shops and this will refocus people if they have drifted back to their local stores, he said.
First Retail Group managing director Chris Wilkinson said Pak n Save Hastings was likely aiming for the wow factor with its 50 cent aisle of value sale.
Its all about market share, he said.
Kristal Leach, manager of Budget First, which does the administration for the Hastings Food Bank Trust agreed that it was a loss-leading gimmick for the supermarket to pull people in the door, but would still be good for its clients.
A promotion like this will help them. They can stock up on a few of those things for winter.