‘It is ending precisely now…’ (Part 4)

This new, 6-part series by Trade magazin and GfK Hungária Market Research Institute focuses on price trends, pricing policies and consumer expectations in terms of price. Last time we examined the increased importance of ‘household tricks’, which have a great influence on consumption and consequently on the volume of retail sales. When we started this series of articles three out of four Hungarian households was indebted in Swiss franc, at an exchange rate of HUF 175. When the last article was printed the exchange rate was nearly 25 percent higher and it is still about 20 percent higher. This means that each month these families have to spend more on paying back their loans and have less left in their wallets for consumption. At GfK Hungária we observed that in the past 1-1.5 years people realised that there are ‘B’ brands and private label products which meet their requirements. Many consumers realised that branded products fail to deliver as much more as they cost. Our opinion is that it will be very difficult to make these people return to ‘A’ brands in the short term.

Based on the above information the logical step would be starting intensive price communication at the point of sale or simply reducing prices. Still, the strengthening of PL products (in terms of volume) seems to slow down, as the present 26-28 percent share of PL products did not change for more than a year. Consequently, cutting prices is not the only solution, even if at the summer of 2010 it seems to be the most evident one. If consumers get used to reduced prices, they will take them for granted in the future. Manufacturer and/or retailer trends point to this direction at the moment and we market researchers have the same experience with shoppers. It will be difficult to break this vicious cycle, but not impossible.