Hannah Maundrell is editor-in-chief at money.co.uk, the free, online comparison service that allows UK customers to compare a range of personal finance products and utility services. In this, the second of her opinion contributions to Produce Business UK, she looks at how the sales performance of UK-based retailers during Christmas 2015 could impact on their future strategies and results
The results from the supermarkets over Christmas were truly a mixed bag that delivered surprises aplenty. After a turbulent year at the tills it was difficult to predict which store shoppers would side with in the battle for customer allegiance.
Last year taught supermarkets four very important lessons about what shoppers now want:
1. Value for money and efficiency are king
2. Convenience is key
3. Brand loyalty is long gone
4. Confusion marketing just doesn’t cut it anymore
The race to the bottom
Previously awarded the title of “cheapest”, Asda has been losing sales at an alarming rate in a new era where lower cost retail chains are booming. Having experienced huge growth over the past 12 months, Aldi and Lidl will be feeling very smug for winning custom.
Interestingly, however, Aldi’s results did not budge in December. Simply being the cheapest appears not to have convinced shoppers to flock to them during the season of goodwill. Fears of overflowing carparks and lengthy queues at the tills means many shoppers were put off doing their most important grocery shop of the year in the bargain stores’ stripped-back environment.
This year we’ll likely see the big chains taking steps to redefine their position with marketing strategies based on more than just low prices. They each need to define who they are, what they stand for and what it says about the shopper if they shop with them. Unless they’re Aldi or Lidl, the cut-price supermarket war is one the chains won’t win.
The novelty of trawling around with a trolley could be wearing thin for many. No longer satisfied with cheap-as-chips goods, customers are demanding efficiency too.
Time-stretched shoppers want an easy life and they don’t have the time to trek around a vast expanse of aisles of tins week in, week out. Tesco has made the decision to rid itself of thousands of lines from its shelves in a copycat move to streamline the business like the discount competitors have done. Lidl and Aldi only offer between 2,000-3,000 lines of products, compared with the current 90,000 lines at Tesco.
This simplification should curry favour with shoppers who feel bamboozled by choice and who don’t have the time to compare the cost and quality of dozens of different brands. It’s likely we’ll start to see this practice roll out in stores across the sector, although choice is what will carry favour for online shoppers.
Make life easy for us
We want convenience, we want choice, we want quality food but we don’t want to leave the house to get it. Supermarkets need to act fast to perfect their home delivery service as fierce competition is on the horizon. Aldi has already dipped its toe in the virtual market with its online wine store launching recently, while Amazon is wading into the grocery market later this year with AmazonFresh. Growth online is set to soar and with Ocado arguably beginning to own its reputation in that space, the big chains really need to act fast to prove they are still in the running.
Nobody shops in just one supermarket anymore; we get our staples delivered to home or at the discount stores, we head to convenience stores for top-ups during the week and we pop into the likes of Waitrose and M&S for posh picks at the weekend.
Brand loyalty has gone out the window and numerous loyalty points cards fill our wallets nowadays – not just one very well-worn one. Mix-and-match shopping is where it’s at; and our decision is driven by cost, quality and time.
Full-price phobic shoppers make a trade-off every time they need to shop; if they have the time, they vote with their feet and go where staple goods are cheapest. If they’re too busy, then home delivery and convenience store prices seem well worth paying a premium for.
Don’t try to catch us out
Pumping the smells of bread through the entrances of supermarkets, BOGOF [buy-one-get-one-free] offers on goods you don’t really want, special deals that save us pennies and flashy advertising campaigns are not going to cut it anymore. Shoppers have got savvy and they do their research. They read labels, they hunt for bargains and they remain suspicious.
Marketing departments must move away from confusion tactics if they want shoppers to keep the tills ringing. It will take more than just an Oscar-worthy advertising campaign to curry favour after the Christmas chaos has ended.
Each chain needs to learn from last year’s race to the bottom by hanging its hat on something unique. They must re-establish their brand identity to define their place in the market. For example, Tesco worked hard to deliver excellent customer sales over Christmas by upping its staff numbers in stores and that seemed to pay off.
Sainsbury’s has considered buying businesses that will bolster its offerings beyond food – a move that could seem them being placed firmly ahead of the curve.
But it’s been a long time since we’ve seen any of the big chains do anything truly groundbreaking to alter the way in which we shop for our weekly groceries. They need to quickly work out their new status in the pecking order of price versus quality, or give us something completely different.
A sad finale?
The supermarket war is not without casualties; the real victims of this ongoing battle are the food manufacturers. Record numbers fell victim to the price clash last year but little is being done to address the issue. A big question mark hangs over what this means for the future. It’s a very real and frightening concern. The chains need to address this pressing issue quickly if they want to protect the businesses that ultimately stock their aisles.