Grocer Promotions: Discount Store Coupons
Tesco's Fresh & Easy Neighborhood Market has resumed distributing its deep-discount store coupons by direct mail to residential households located in the neighborhoods surrounding its 119 small-format, convenience-oriented combination grocery and fresh foods markets in California (Southern and Bakersfield), southern Nevada and Metropolitan Phoenix, Arizona.
Fresh & Easy mass-mailed a supplemental promotional flier this week (most residents received it on Tuesday, April 28) that contained one of its $6-off total purchases of $30 or more store coupons. The store coupon is good until May 25 -- which makes its duration nearly a month long -- which is unusual even for Fresh & Easy, since most of its recent past coupons were good for about two weeks maximum.
The promotional flier contains some brief advertising copy and photographs of various products, with the $6-off discount store coupon being the centerpiece.
The ad copy says:
We're a neighborhood-sized market that's quick and easy to shop
*fresh and wholesome foods
*all your favorite brands
*a variety of prepared meals
This is the same ad copy the grocer has used in its direct-mailed, paper store coupon supplemental promotional fliers in the past.
The advertising flier also has pictures of various food and grocery products on it: milk eggs, Bertolli brand Pasta Dinners, chicken, bell peppers, avocados, strawberries, Corona Beer, Trix brand Cereal and fresh flowers.
The supplemental promotional flier was mass-mailed in addition to and separate from Fresh & Easy's regular weekly advertising flier, which it direct-mails to residences each week.
Bringing back the direct-mailed store coupons
As we previously reported, Tesco's Fresh & Easy stopped distributing its deep-discount store coupons via direct snail mail in February of this year. Prior to that the grocery chain distributed the fliers often and regularly using similar paper fliers, along with posting the store coupons often at the same time on its Web site.
In fact, since February, with the exception of issuing a couple online store coupons good for just a few days at a time, Fresh & Easy hasn't distributed the discount store coupons at all over the last three months.
Instead, beginning in early March, the grocer changed the frequency of its mass-mailed paper and Web site-based advertising flier from a frequency of once-every-three-weeks to one-a-week, like all of its competitors' in California, Nevada and Arizona offer. [See our March 11, 2009 story here: Fresh & Easy Buzz Redux: Tesco's Fresh & Easy Changes its Promotional Advertising Flyer to 'Weekly;' Something We've Been Suggesting For About A Year.]
Tesco's Fresh & Easy also has offered more items at better promotional prices since going to the weekly advertising flier duration in early March than it did prior to that.
However, since the grocery chain stopped issuing its store coupons on a regular basis in February of this year -- in the past it issued them nearly every couple of weeks -- it's received numerous comments and complaints for customers via its corporate Blog and on its Twitter.com feed. Many customers have said they want the store coupons on a regular basis like in the past.
Over the last couple months there's been communication from customers wanting the coupons and the Fresh & Easy Neighborhood Market marketing people who run the Blog and Twitter site, both of which we monitor regularly. Fresh & Easy's marketing folks responded a couple times to the customers by issuing online store coupons good for three -to- four days, and then announcing the availability of the coupons, with a link, on its Twitter.com feed and on the company marketing Blog.
It appears Tesco's Fresh & Easy has now decided not to do away with the store coupons completely, particularly distributing them via the supplemental direct mailed paper fliers, as the grocery chain's senior management hoped it could.
We don't expect Fresh & Easy to issue the store coupons at the same frequency that it did from November 2007, when the first stores opened, until January, 2009, though. That frequency was so frequent that shoppers became so used to the deep-discount coupons that many wouldn't shop at the stores without one. Of course, we could be wrong.
Additionally, up until the end of 2008 Fresh & Easy distributed the coupons liberally in its stores. It was the norm to give each shopper one or more of the $5-off (purchases of $20 or more) and later $6-off (purchases of $30 or more) store coupons regardless of the dollar amount of grocery purchases they made in the stores. We received three of the coupons a few times after buying about $15 -to- $20 worth of items, for example.
Tesco's Fresh & Easy started cutting back the number of coupons it gave out in the stores in the fall of 2008, much to the chagrin of customers. By the end of last year most of the stores were no longer handing out the coupons, although we've seen a few stores that still have them on occasion to give out to shoppers.
Once Fresh & Easy stopped the store-level distribution of the coupons, shoppers increasingly were asking for them via direct mail and online. In January of this year the grocery chain distributed the discount store coupons via direct-mailed fliers at least twice in the month. But beginning in February it stopped doing so, likely in anticipation of the launch of its weekly advertising circular featuring hotter than in the past promotional prices, a few weeks later in early March.
Fresh & Easy store coupons: Now what?
It will be interesting to see how Tesco's Fresh & Easy handles the store coupon situation now. The new $6-off store coupon is going to once again wet the appetites of the store coupon-hungry Fresh & Easy customers. It should also draw some new shoppers into the stores.
The problem is those same core Fresh & Easy shoppers, the ones who have become used to the coupons, will be looking for another deep-discount store coupon soon after this one expires on May 25. The" coupon crack is back," is what one happy Fresh & Easy coupon-shopper said to us in an e-mail.
Store coupons as promotional vehicles
And the fact that the current store coupon is good for such a long period of time -- expires on May 25 -- seems to indicate a need for the grocery chain to stimulate sales.
Normally in the retail grocery business, as we've written about before, such deep-discount store coupons are good for maybe three to four days -- and one week at the most, when they are used at all -- which is very infrequently and by few retailers.
Early this year, supermarket chains Safeway, Sacramento-based Raley's and Whole Foods Market all issued store coupons. But those respective grocers' discount store coupons were good only for three days in duration. [February 2, 2009: Competitor News: Safeway Stores, Inc. Enters the Store Coupon Derby in Southern CA, Nevada, Arizona; Part of Extending its 'Value Proposition'.]
The reason for this is that the store coupons are used as a promotional device. As such, they are primarily designed to stimulate sales over a short period of time, such as from Friday -to- Sunday, which are the prime grocery shopping days for consumers, and thus the most competitive for food retailers.
The danger in issuing deep-discount store coupons to often and with too long of a per coupon shelf life -- like a two or three week expiration date -- is that shoppers come to think of such coupons as a regular part of a grocer's way of doing business and pricing structure; that the only time groceries are reasonably priced in its stores are when the retailer issues these store coupons, even if that's not the case, as it is at Fresh & Easy, which has good everyday prices.
But perception is reality when it comes to consumers. Think about that "coupon crack" comment the reader-Fresh & Easy coupon-shopper made. And by issuing the coupons so frequently, Tesco's Fresh & Easy has actually created this perception via its marketing.
Store coupons and grocer margins
As we've said before, most grocers also set the minimum purchase amount of such coupons much higher than $30. For example, when Safeway and Raley's issued their respective three day duration store coupons early this year, the minimum purchase amount for both chains was $50. Safeway offered a store coupon good for $10-off purchases of $50 or more (a 10% savings). Raley's offered two versions -- one good for $10-off $50 (10%-off) or more and a second coupon with a value of $25-off purchases of $100 or more (25%).
The logic and practice in the industry is that the higher the minimum purchase, the higher the percentage off you can go. Within reason of course.
For example, Raley's $25-off $100 coupon offered a savings of 25%-off, 5% more than the $6-off $30 Fresh & Easy coupon does. But Raley's minimum purchase to use the coupon is $70 higher than the $30 Fresh & Easy $6-off store coupon minimum.
This is important because another key purpose of deep-discount store coupons is to increase the market basket size (total customer dollar purchase during the shopping trip) of what a shopper purchases. Giving 5% more on a minimum that's $70 more than the Fresh & Easy coupon's $30 minimum purchase pencils out OK for a grocer, particularly when the coupon is only good for three or four days. A 5% difference on a sale of $70 more is workable, as long as the exposure isn't for multiple weeks.
The percent discount on store coupons comes out of the retailer's margins. That is unless of course the grocery chain comes up with a store coupon promotion like Safeway Stores' is now conducting, which is funded mostly using promotional funds contributed by its suppliers. [Read our April 28, 2009 story here: Competitor News: Safeway Leverages Supplier Promo Monies to Fund 'Living Well Feeling Great' $10 Store Coupon On $30 Purchase Promotional Program.]
Safeway hasn't issued any additional direct discount store coupons since the first of this year. Instead it created the promotion described above, which it's been running for a number of weeks now. It end in early May.
Retailer-issued store coupons and margin erosion
Now that Tesco's Fresh & Easy is running a weekly instead of every-three-weeks advertising flier, along with offering hotter promotional price points on the advertised items in the flier, it risks eroding margins considerably if it does this and issues the deep-discount store coupons on any regular basis at the same time, particularly for three week-plus durations like the present $6-off store coupon is for. That's why we would find it very strange from an experiential and analytical standpoint if the grocery chain goes back to its old frequency -- basically all the time -- of issuing the store coupons.
However, the fact that the current $6-off purchases of $30 or more Fresh & Easy discount store coupon runs for nearly a month (doesn't expire until May 25) leaves us wondering. That's a long period of time for a grocery chain to have such a coupon out there in the market from a margin erosion standpoint, especially in conjunction with weekly item discount promotions.
But we suspect the three-plus week shelf life of the coupon is going to please the many Fresh & Easy shoppers who told the grocer it wanted the deep-discount store coupons back, and that without the store coupons they weren't shopping as frequently (or at all) at or purchasing as much in the Fresh & Easy stores.
The main problem with such coupons is that they put too much of an emphasis on price discount over other forms of merchandising and marketing. And since Fresh & Easy has already trained shoppers to rely on these coupons, even though the everyday prices in the stores are good, it runs the risk of further creating a shopper class that perceives the stores as only offering good prices when the deep-discount store coupons are distributed.
We thought Fresh & Easy figured this fact out when it stopped the regular practice of issuing the store coupons in February and switched to a more item-focused promotional scheme with the weekly ad (launched on March 4) and hotter promotional price points.
But clearly that hasn't worked thus far from a store sales volume standpoint. If it had there would be no need to issue a $6-off coupon good for nearly a month. Good for three -to-four days, fine. That's a promotion. But good for nearly a full month? That's a sales salve, even in a recession.
Retailer-issued deep-discount store coupons like Fresh & Easy's can play havock with a grocery chain's gross margins when used frequently because the discount amount comes out of the retailer's margins, as we've said. Tesco PLC didn't report the full-year gross margin for Fresh & Easy when it reported its sales and profits on April 21. Instead it put n/a (not available) in the gross margin column in its published section for Fresh & Easy. [For the details see: Tesco PLC Reports Record Sales and Profits; But Takes £142 Million ($208.05 Million U.S.) Loss For Fresh & Easy Neighborhood Market USA.]
Customers happy campers though
But we know the Fresh & Easy shoppers will be happy. After all, they rightly need not concern themselves with things like margin and break-even. [Read - April 21, 2009: Tesco PLC Reports Record Sales and Profits; But Takes £142 Million ($208.05 Million U.S.) Loss For Fresh & Easy Neighborhood Market USA.]
Their goal and a grocery shopper's job-one is to get the best deal he or she can on groceries. And with the $6-off purchases of $30 or more discount store coupons, combined with the everyday prices and advertised promotional prices at the Fresh & Easy stores, that works out to a very affordable deal on food and groceries -- for shoppers that is.
Related stories and posts:
>January 27, 2009: Tesco Fresh & Easy's 'New' Advertising Flyer: Minimalism Without Thought or Design Does Not A Retail Advertising Communications Piece Make
>September 4, 2008: News & Analysis: Tesco's Fresh & Easy Launches New Direct Mail Promo Piece Full of $5-Off Discount Coupons; Is it Taking Deep-Discounting Too Far?
.March 7, 2009: March 7, 2009: Analysis & Commentary: The Seven Retail Operations Changes Tesco's Fresh & Easy Neighborhood Market Needs to Make to Help it Get On the Success Track
>March 2, 2009: Fresh & Easy Buzz Redux: Much of the Value Proposition-Based Analysis and Suggestions We've Been Offering Now Being Adopted By Tesco's Fresh & Easy.
September 26, 2008: Tesco's Fresh & Easy Neighborhood Market Experiments With A $1-Off Online Discount Coupon; But its Paper Coupons Offer More Than Twice the Value
>Monday, February 2, 2009: Competitor News: Safeway Stores, Inc. Enters the Store Coupon Derby in Southern CA, Nevada, Arizona; Part of Extending its 'Value Proposition'
>Tuesday, February 3, 2009: Competitor News: 'Grocer-Gone-Wild:' Arizona's Fry's and its 'Bring it On' 'Take All Competitors' (Including Tesco's Fresh & Easy) Store Coupon Move
>January 30, 2008: Breaking Buzz: Tesco's Fresh & Easy Distributes its First Promotional E-Mail Alert Today; Has the Grocer Been Reading Fresh & Easy Buzz This Week?
>December 22, 2008: Marketing: Tesco's Fresh & Easy Launches E-Mail Promo Alert Program; Something Fresh & Easy Buzz First Suggested it Do Many Months Ago
>April 5, 2009: Food & Grocery Retailing in the 21rst Century: New Study Says Younger Consumers Getting Hip to Online Coupons; Particularly Mobile Couponing
>March 19, 2009: Ground Control to Shopper: Point-of-Purchase-Based Mobile Couponing the Next Hot Ticket; Kroger Co. Leading the Food Retailing Pack.
>March 9, 2009: Consumer Use and Retailer Redemption of Manufacturers' Coupons Soaring Says Leading Redemption Company in the U.S.; But Not at Tesco's Fresh & Easy
>March 7, 2009: Google & Yahoo - The Tale of the Search Engines: An Analysis of How Tesco's Fresh & Easy is Losing Out By Not Accepting Manufacturers' Grocery Coupons
>February 12, 2009: Consumer Use of Manufacturers' 'Cents Off' Coupons Continues to Grow: The Latest American Rage: Home Coupon-Clipping and Coupon-Trading Parties
>April 10, 2009: Got Milk? Getting it For Shoppers is Much Less Expensive Now Than it Was A Year Ago in California, Nevada and Arizona; Tomorrow it's Even Free
>December 6, 2008: Use of Manufacturers' Coupons Soaring Among U.S. Consumers; Coupon Delivery Systems Going High-Tech; But Fresh & Easy Stores Don't Accept the Coupons
>December 12, 2008: Marketing & Promotions Report: Manufacturers' Coupons Becoming the 'New Black;' Use Among Consumers Soaring; Marketers Distributing More Than Before
>August 24, 2008: Sunday Supplement: 'America's Cheapest Family' Helping to Spur Increased Use of Manufacturers' Coupons At the Grocery Store; Accept At Fresh & Easy
>April 28, 2009: Competitor News: Safeway Leverages Supplier Promo Monies to Fund 'Living Well Feeling Great' $10 Store Coupon On $30 Purchase Promotional Program
>April 12, 2009: Online Grocery Coupon Use Soaring; Coupons.com Reports Whopping 192% Increase ($57 Million) in Value of Coupons Printed in March 2009 Over March 2008
>March 11, 2009: Fresh & Easy Buzz Redux: Tesco's Fresh & Easy Changes its Promotional Advertising Flyer to 'Weekly;' Something We've Been Suggesting For About A Year
>October 1, 2008: 'The Promotional Pundit:' Fresh & Easy Buzz Analyzes, Offers Suggestions and Grades Tesco Fresh & Easy's Bi-Weekly Advertising Flyer
March 11, 2009: A Fresh Freebie: Tesco Fresh & Easy Offering Online Coupon Good For Free Reusable Canvas Shopping Tote Bag
>June 18, 2008: Tesco's Fresh & Easy and it's 'Value Proposition:' We Asked, They Answered; Discussion, Deconstruction and Fresh & Easy Buzz Analysis
[Follow Fresh & Easy Buzz around on Twitter.com at www.twitter.com/freshneasybuzz.]