Discount retailers are again making headlines in the UK. With the economy faltering, the likes of Aldi are gaining share at the expense of the country’s major retailers. As Sam Webb writes, the likes of Asda and Sainsbury’s are fighting back and emphasising that consumers can find value with them.
In 2008, in the very teeth of the recession and with official food inflation figures hitting a record high of 14.5%, the major supermarkets went to war with aggressive price cuts and the mass introduction of discount ranges.
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A price comparison fight ensued as the big four sought to outpunch their rivals and convince shoppers that their baskets would bear the lightest financial load.
Fast forward to today (18 August), where the latest numbers from the Office for National Statistics show growth as a result of inflation and January’s VAT rise.
Food sales are up but only due to inflation. Volumes remain under pressure, which has led retailers to step up promotions to shore up volumes and boost traffic.
With the UK consumer cowering from the economic headwinds, supermarkets are embroiled on a price comparison battle to win the hearts of consumers.
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By GlobalDataAsda came out swinging last year with a website, asdapriceguarantee.co.uk, that allows shoppers to check the cost of their grocery shopping against what they would have paid at Tesco, Morrisons, Sainsbury’s and Waitrose.
If their shopping was found to be cheaper at the other retailers, Asda issues shoppers with a voucher to be redeemed instore or online.
This week, Sainsbury’s launched its own hi-tech scheme, which is currently being piloted in Northern Ireland. The retailer’s ‘Brand Match’ technology instantly calculates the cost of the brands in a customer’s basket and compares it to the cost of the same basket at Asda and Tesco, including any promotional deals they are running.
If the basket would have been cheaper elsewhere, shoppers will immediately receive a coupon equal to the value of the difference.
In a bearly-concealed dig at Asda, Sainsbury’s said: “We understand [shoppers] don’t want to spend time constantly checking prices or logging onto a computer to print out a coupon at home.” Fighting talk indeed.
Yet despite the efforts of the Big Four supermarkets, discount operators like Aldi and Lidl have gained market share at their expense, just like they did in 2008.
Have Aldi and Lidl finally proved they can offer customers not just cheaper goods, but genuine value?
Edward Garner, director at market researcher Kantar Worldpanel, is not so sure. “Despite their growth they are still niche players and I don’t think they are going to take over the world. They only have a limited number of products and the UK is not like Germany, where there’s an Aldi on every street corner.”
He also points out that growth is not limited to discount operators, as Waitrose has also punched above its weight in the past few years. The economy is still faltering, so how has a premium retailer improved its market share so significantly?
In the depth of the downturn, Waitrose very cleverly appealed to value-conscious shoppers without sacrificing its quality status by launching a successful own-label Waitrose Essentials line.
Garner notes, however, that Waitrose has also prospered as price is not central to all buying habits. “Simply put, not everybody wants the same thing. Some shoppers have objectives other than low price. Waitrose has worked hard to shed its image as an intimidating shop and there are people who haven’t suffered in the recession and have a lower mortgage.”
Despite Asda and Sainsbury’s technological innovations in price comparison, there is not much further the supermarkets can take the concept, according to Neil Saunders, consulting director at retail industry analysts Verdict Research.
“When Asda first did it, price comparison was quite revolutionary. Now it’s almost a box to be ticked,” Saunders says. “If a supermarket really wanted to push home the price message it would abandon price comparison, simply say they are the cheapest and then slash food prices. The fact that no one does shows they are not in the mood for an all-out price war.”
It appears that price comparison, with its perceptions of value for money, will remain UK supermarket’s key battlefield – for now.
