It has always seemed bizarre to me that supermarket chains believe the best way to halt a plummeting profit line is to lower their prices.
Matching the competition, as Tesco has again pledged to do with its Price Promise, seems almost more strange. Surely pledging to be exactly the same as your rival is unlikely to bring too many more people through the doors. Tesco may have more chance of stopping shoppers leaving its stores with this tactic. But as a consumer, if I was to shop in Sainsbury’s for instance and I like their products, why would I desert Sainsbury’s if the best Tesco can do is match the price I get already?
With year-on-year sales falling in the latest Kantar figures and its profits having halved in the last financial year, either Tesco needs new shoppers or it needs the shoppers it already has – which are still many in their number – to spend more, not less.
Of course everyone is running scared of the ‘discounters’. They may boast lower prices in their stores, but their success is not based on that alone. Aldi, in particular, has convinced enough shoppers that the quality of its offer has improved immeasurably that when it gets them through the doors, they already have a perception that the products they see will be perfectly acceptable and often better than what they could have bought in the supermarket they used to call home.
It’s easy to say that Lidl has held onto Aldi’s coat-tails a little, but that would also be disingenuous, as the second largest German-owned discounter on British shores has achieved spectacular results of its own with a more subtle, but similar marketing message.
Maybe then, the way forward for Tesco is to focus on its products again and entice customers back with a product portfolio that excites them. Over the years it has had fantastic success with its Finest range; equally in its non-food offering, and it has done things that have left its rivals flat-footed for long periods.
No disrespect to any of the products in Aldi and Lidl, but as an overview, I think they have proved that it isn’t necessary to have the very best products on the market to persuade more customers to spend more money at the tills. In my opinion, Tesco did that too for many years. It was the supermarket everyman, with something for everyone and consistently good product and competitive prices. Now, even though those labels could all still be attached to Tesco, its points of difference are far harder to discern at the homogenised top end of the retail grocery market.
Tesco is the market leader – so it attracts more attention. But the big four have a collective responsibility for having made shopping in a UK supermarket a pretty monotonous experience since they all decided to copy each other relentlessly. The public had been bored into submission before the recession. Now that they are not protected by ever-increasing profits, that malaise seems to have hit the under-pressure supermarket head offices.
There is a dearth of new ideas. There is a lack of creative merchandising. There is a strong desire to cling on to price as the only mechanism used to achieve customer loyalty.
It is baffling. I was in Brussels at a conference recently and one of the speakers said something that I immediately associated with the UK supermarket scene. He said that we should never confuse evolution with innovation. Simply doing the same things over and over again is not innovative; innovation is something creative – something that when you share it, it changes the way that you and others think and moves things onto the next level.
Innovation has to be disruptive and Tesco has lost the art of disruption. For a long time, it was a master of that art. I’ve not met him, but I hear plenty of good things about Dave Lewis. A lot of people expect him to be the next disruptor; to have the drive and ideas to turn this big ship around. But making a “Price Promise” does not signal a particularly individualistic approach. It smacks of so many regimes before him, across every single supermarket chain in the UK. And it’s an “aggressive” route for which the retail world has developed a reliable defence, even if that defence is generally to take the bar even lower and make the whole thing less sustainable every time it happens.
Granted, Tesco is not in a wonderful position to make grand statements, but it is nevertheless still way ahead at the top of the market share charts. Having already slashed its petrol prices, Tesco has again followed its own and other’s history – rather than showing it has the wherewithal to use its lofty perch to find a new way – the type of new way that catapulted it to the top of the supermarket tree in the mid-1990s.
When a front-running leader shows consistently that they are willing to be a part of the pack, the obvious conclusion is that they have run out of steam. Tesco has sat on the shoulders of others since the post-Leahy era, and until they develop a Mo Farah kick, they will always be seen as chasing the field, however far ahead the share data suggests they are.
