Blog: Retailers battle Christmas crunch
Dean Best | 8 December 2008
With the peak Christmas trading period upon us, competition for constricting consumer spending is intensifying between food retailers.
As just-food learnt last week, while the global economic downturn means that Christmas 2008 (/article.aspx?id=104690) is not likely to be a bumper year for supermarkets, products and retailers that deliver the right combination of value, quality and indulgence are well-positioned going into the festive period.
Over the past six months, UK retailers have increasingly vied to demonstrate their "value" credentials. Last week, two of the industry's giants – Tesco (/article.aspx?id=104644&lk=s) and Morrisons (/article.aspx?id=104678&lk=s) – delivered trading updates.
Tesco, the UK's largest retailer, booked domestic third-quarter like-for-like sales growth, excluding fuel, of just 2% during the 13 weeks to 22 November.
As Tesco CEO Sir Terry Leahy emphasised, economic conditions in the UK have hardly been conducive to strong sales growth. Nevertheless, sales gains at Tesco's closest competitors – Asda, Sainsbury's and Morrisions – have outpaced their larger rival, causing some concern in the city that Tesco has lost focus on its home market (/article.aspx?id=104657&lk=s).
As Hargreaves Lansdown analyst Keith Bowman told just-food: "There is some suspicion that Tesco management may have taken their eye off the ball in the UK."
Carrefour, another retail giant that has experienced problems in its domestic market, last week unveiled two new store concepts that it hopes could rejuvenate its French convenience business (/article.aspx?id=104708&lk=s).
The company is piloting the new Carrefour Contact and Carrefour City banners, aimed at semi-rural and urban markets respectively. The trials reflect Carrefour's commitment to developing its formats to drive domestic growth, a spokesperson for the retailer told just-food on Friday (5 December).
Meanwhile, German retailer Rewe revealed that it is increasingly looking overseas to fuel sales gains last week, when it increased its footprint in Russia with the acquisition of 13 Njam Njam supermarkets (/article.aspx?id=104680&lk=s).
In the ongoing fiscal year, Rewe said it anticipates revenues generated by its Russian supermarket business to rise by about 40%. This will be achieved through organic growth, Rewe indicated.
However, the retailer declined to rule out the possibility of further acquisitions in Russia. "We are continuously observing the market," a spokesperson for the company told just-food (/article.aspx?id=104704&lk=s).
Watch this space for further developments.
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