Blog: Katy AskewUK grocers face mounting pressure

Katy Askew | 6 June 2014

Management at the UK's largest retailers are seeing the pressure mount. As sales continue to disappoint and market share continues to be eroded, some serious questions are being asked about the strategic direction pursued by the likes of Morrisons and Tesco.

Earlier this week, Tesco booked its worst sales result for 40 years as it emerged that million shoppers a week may be abandoning them for rivals.

The group's CEO Phillip Clarke is facing some tough questions over the Tesco's strategic direction, which is focusing on "leading the retail revolution" and developing an unparalleled omni-channel offering. While the firm is investing in price, is it investing enough - and shouting about it loudly enough?

Tesco is far from being the only UK retailer under fire. At the company's AGM in Bradford this week, Sir Ken Morrison - founder of the Morrisons chain - struck out at the strategic direction being pursued by current CEO Dalton Phillips as "bull***t".

Sir Ken has been a vocal critic of Mossisons' drive online and work to revamp its store base, suggesting that the group is losing touch with its value-conscious core customer.

Supermarkets at the value end of the market are losing sales to the likes of Aldi and Lidl, who seem on an almost unstoppable march that has again see them grow market share, according to figures from Kantar Worldpanel also released earlier this week.

Aldi and Lidl benefit from a price message that is crystal clear - and one that has seen them move into the mainstream of UK grocery retail. They are also opening shops at a faster pace than the country's major supermarkets, another factor boosting their market share performance.

What defence can UK grocers mount?

Sainsbury's alone has refused to enter the race to slash prices.

Rather than fending off the threat of the discounters by playing them at their own game, the company believes it can use the footfall that a new Aldi or Lidl store might bring to its own advantage. While the company would expect to lose sales on some products that the discounter is known to offer cheaply, by focusing on what Sainsbury's does best - and what the discounters don't stock - the company believes it can see a net gain.

Sectors: Retailers

Companies: Lidl, Aldi, Morrisons, Tesco, Sainsbury’s

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