Every £500m helps

Every £500m Helps…

Hey, you remember that guy at Tesco? No not Phil Clarke, the other one? Richard Brasher. Well, the so-far virtually anonymous new Chief Exec of the UK business finally surfaced this week to flag up £500m of price cuts. As a veteran of the price wars that broke out in the late 1990’s, I’m getting a strange sense of déjà vu – not least because a talented Marketing Director by the name of Richard Brasher was leading the charge for Tesco.

The impacts of “We’ve Cut Out Prices” and “We’ve Cut Our Prices…Again” (originally briefed as “F*** me, We’re Cheap”!) were big at the time and the new £ and Scissors logo became iconic. Coupled with investment in stores, both new sites and bringing older stores into the 20th century through the Refresh My Superstore and Metro programmes, Tesco were able to ensure WalMart’s entry to the UK market was not as dramatic as they hoped, put further daylight between them and JS and ultimately lead to the deathknell for Kwik Save. They showed that you didn’t need to compromise your shopping experience to get great value and the shoppers bought it in their droves.

So can returning to basic price cuts really help Tesco out of its rut?

Kantar data is suggesting the two businesses who continue to invest in store experience with only subtle price communications are winning. As household disposable income becomes squeezed, a higher proportion of it will be spent on food. This means grocers will be need to provide the “hit” of leisure shopping that moved to non-food operators on Retail Parks and big malls when times were good. A voxpop from piece of research carried out at Tesco when I was involved on the price campaigns has always stuck with me – “I don’t like all these signs telling me how cheap you are – I know that. If I wanted signs reminding me how tight my budget is, I’d be shopping at Kwik Save”.

I’m sure that’s even truer now that it was 13 years ago. As a nation, we got hooked on easy credit and leisure shopping. We still want that drug – Westfield Stratford clearly showed that – but we’ll need to get it when we buy the food we depend on. Step forward Waitrose and Morrisons – they want you to come into their shops and feel good about it.

Nothing new from Waitrose – their shops have always been a bit special, although the hand-painted wallpaper in the Leeds store café is perhaps a tad excessive. Now they are more accessible with more stores and a really strong private label in the form of Waitrose Essentials, they are gaining share of just the kind of people who want to feel good about themselves.

Morrisons are coming from a different perspective as frankly the majority of their stores are horrible overcrowded places which remind me of the store standards that we in place when I was a spotty youth over 20 years ago. M Local and Kirkstall have changed that – they are creating retail experiences that we’ve not seem in the UK before,  or at least not since Tesco refitted Pitsea as an Extra and put in dancing penguins on top of the freezers.

What both Morrisons and Waitrose are doing is putting product at the heart of their store concepts. If you go back to our shopping mentality when budgets are tight, we’ll look more to food to treat ourselves with, paying a pound or so more for something a bit special to go with our Smart Price Orange Juice and Pasta.

Bringing this all back to Tesco, experience suggests that we won’t know if this has worked for a while, and probably after more cuts from Tesco and their competitors are announced. Asda’s PR team (my biggest fans!) went on a grapeshot offensive on Twitter in the wake of Tesco’s announcement, but we’ll have to wait and see if Asda have got any real news for their PR team to fire out. It took JS to bring a bit of decorum to proceedings by pointing out that stopping double Clubcard points will save Tesco £350m.

The last couple of years have proven that none of us really know what will happen in retail, so for us retail geeks all we can do is grab a nice glass of wine, sit back and watch the carnage unfold during the Golden Quarter.