Sainsbury’s chief executive Justin King today (9 November) heralded the company’s work to alter consumer’s perceptions of the supermarket’s position on price – but admitted there is still work to do.
Speaking at a press conference at the company’s London HQ in Holborn, King said the Live Well for Less and Brand Match initiatives have helped dent the perception of the retailer being uncompetitive on price, especially in relation to brands.
The problem, he said, is the “historical legacy” of Sainsbury’s being more seen as expensive on brands than other supermarkets – a key consideration in the formation of Brand Match – and the fact that customers spend more when they do shop at Sainsbury’s, thinking the extra money is related to price.
He said: “Broadly speaking, customers think we’re more expensive than we are – typically 5% to 10% more than our competitors.
“However, when they shop with us they spend more money than they do with our competitors because our fresh food is better and they buy meat with us and don’t trust other retailers’ meat – and they don’t immediately register that.”
“We have done a tremendous job of making our price position competitive.”
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However, Sainsbury’s has no plans to step up advertising as part of its attempt to shed its image as a more expensive retailer. The company said it will buck the trend of increased advertising spend and instead spend the money on consumers, saying that media presence is an “ineffective investment”.
King also spoke about the changing behaviour of consumers as they continue to count the pennies in the face of continued economic uncertainty.
He added that consumers are not only seeking bargain-priced goods as a result of the economy, they are also seeking out premium goods because they are curbing spending in other areas, such as going out, holidays and household goods.
He said: “They trade down and up at the same time. Customers are preserving the special things in their life but saving money where they can.”
Separately, speculation has been rife about the interest the big supermarkets are taking in Iceland Foods, the frozen food retailer where a controlling interest is currently up for sale by the two failed Icelandic banks who own it.
When asked if it was sitting back and waiting to see what stores become available (Asda and Tesco would both have to sell stores because of competition concerns if they bought the chain), he only replied: “That’s not a bad description.”
In terms of organic expansion, Sainsbury’s will focus on the convenience format, with less emphasis on new stores than Tesco and Morrisons, but added that a greater proportion of new stores will be eight miles or more from existing sites than the other supermarkets.
King also dismissed the thinking that hard discounters are gaining market share on the ‘big four’ grocery retailers.
“In total, in the last 18 months they have actually lost significant market share. It’s been good news for Aldi and Lidl but that’s because they are picking up what’s left from Netto.”
Netto was acquired by Asda in April and is currently being rebranded.
Speaking after the press conference, Mark Rigby, director of corporate affairs, feels the price-conscious, efficient approach to shopping will continue even when the UK economy strengthens.
He said: “I think the need to be more thrifty and waste less and do top up shopping has begun to influence the shopper’s habits in a way that won’t die easily.
“As the market recovers, and I believe it will, I think there will be some superb trends of people who waste less, use leftovers and shop more smartly.”