The contraction in consumption, a consequence of high inflationary pressures, has revived the economy’s typical artillery anabolic that companies put into practice to encourage sales: 2 for 1 promotions, or discounts on certain days of the week and/or with certain debit or credit cards, among other stimuli.
But this trade policy, which is usually always applied in crisis contexts, has been the epicenter of a controversy in recent days: Are these resources really useful for increasing sales? Are they used by consumers? To what extent do they help alleviate the erosive impact of inflation on wages?
The start of the debate was given by the Minister of Economy Luis Caputo when he asked a group of supermarkets to choose to directly lower the prices of the products without resorting too much to promotions because – he claimed – “do not reflect declines” in official price measurements. In a context in which the Government must quickly demonstrate that inflation is falling.
There, INDEC intervened to clarify that these promotions have existed for a long time, that they are limited and that, to be reflected in prices, “they should be extended to all consumers”.
Another resource to which the Government has appealed in recent days – focused on lowering prices – was facilitate the import of some products from the basic basket and also of medicines, through tax exemptions. This has been widely criticized by large supplier companies and also by local manufacturing SMEs, annoyed by the difference in treatment towards the importing sector.
According to the consumer and social humor specialist, president of the consultancy company W, Guillermo Oliveto, there are five keys to understanding what is happening in the Milei era: “The first is that the company is facing a great moment”“Reset” because “change” was chosen by the majority of society. The second key is the change in the way of thinking about events (mentality). Third, we must understand that we are in a process unpublished, that companies must adapt to.
Fourth, there is another reality: ““the market is back” summarizes the analyst. “The government tells entrepreneurs: set the prices you want, sell what you can.” Therefore, the great challenge for companies in this new context is to define and calibrate their price and quantity strategy.” And finally, also play “speed”. “The government has huge incentives to move very quickly through this process. That’s why he makes this disruptive proposal for a lower level of well-being and greater patience.”
How does the consumer fit into this context?
According to a survey by the company’s Kantar Insights division. seven out of 10 Argentines organize their agenda based on available discounts. And 82% say they buy their favorite brands only if they have discounts or are on promotion. “However, consumers believe there are several features of these actions that can be improved: limits, conditions or quantities and clarity in previous prices”.
Javier Gonzalez, an analyst at the specialized consultancy firm Nielsen NIQ, believes that the promotions “do not only impact the upper-middle class sector that buys at the supermarket, but also have an impact on those who buy on weekends, a period in which these promotions are active.” “, he says. However, “given the context in which we find ourselves, if the promotions are in exchange for purchase quantities (therefore greater spending per purchase) they are less attractive for a consumer who expects to take care of himself out of his own pocket”, He says.
According to Oliveto “people buy what is right and necessary. And each segment chooses which cuts to make to make it to the end of the month”. “Argentinians have already been trained in this culture of austerity, but “It’s one thing to think about adaptation and another to live it”He says.
The decline in purchasing levels was not long in coming from specialized consultancy firms: in the first two months of this year the supermarket channel suffered a significant decline, accumulating a drop of 8.3%according to the consultancy firm Scentia.
In this recessive context, “promotions are appearing little by little”, says Osvaldo del Rio, president of the consultancy firm. And he adds it in 2023 They accounted for approximately 8% of sales and are now close to 12%.”.
From the market research company ShopApp, its CEO Juana Merlo confirms that “today promotions play an important role when purchasing any product. more than any other economic moment.”
A recent survey, carried out by the company in March, found that 9 out of 10 respondents have changed the way they consume in supermarkets in the last three months. “The type of dynamics they exploit the most is 2X1 (7 out of 10 mention this type) and % discount with virtual wallets (55%) and bank cards (49%). Behind it are the discount on the second unit (37%) and the % on specific products (30%)”.
Buyers find out about this type of event mainly through social networks (51%), but they also use emails sent by supermarkets, which is why they are subscribed to this type of notifications,” explains Merlo.
From a macroeconomic vision, Jorge Vasconcelos, chief researcher at IERAL, frames the issue of promotions in the Political and economic context: “Even if inflation is decreasing, the question is what will happen in March: whether it will remain at the same level or not,” says the economist. And he adds that “another urgency” of the Government concerns the devaluation at the rate of 2% per month, which It also puts pressure on prices..
“In a scenario of rising inflation, like the one we come from, there was a way of managing by companies, which took inventories or accumulated stocks. However, now this has been reversed. Companies don’t know if they will be able to sell those shares In this new equation, the criteria change: “prioritizes sales acceleration and that’s where promotions appear,” explains Vasconcelos.
In any case, according to the economist, this mechanism belongs to businesses does not include responsibility for showing reductions in inflation, such as those needed by the Government. However, after Caputo’s suggestion, a chain of the Cencosud group took up the official concern: it modified the publications of the offer. In “3×2″ or “4×2″” format, began offering linear price discounts in some specific products. Something that was celebrated on social media by the Minister of Economy.
Source: Clarin
