Do Sales Matter? An Exploration of Price Discounting in UK Food Retailing

This paper assesses the impact of promotional activity in the prices of food products on supermarket shelves. The study analyses a unique, high frequency panel of supermarket prices consisting of over 230,000 weekly price observations on around 500 products in 15 categories of food stocked by the UK’s seven largest retail chains. In all, 1,700 weekly time series are available at the barcode-specific level including branded and own label products. Prices are inclusive of promotions and thus allow the frequency, magnitude and duration of sales to be analysed in greater detail than has hitherto been possible with UK data. Using this price data, sales periods are indentified. Results show that around 8% of products are on sale at any one time, and that sales are typically four weeks in duration. The average discount is 24% of the regular price. Importantly, sales are shown to have a relatively modest role in overall price variation – less than the dispersion in prices by retailer, pointing to changes in the regular price, via general inflation and idiosyncratic shocks, as the principal cause of price variation.