A couple of months back, JS beating Asda into second place got brushed under the carpet, but this week’s reaction to Waitrose being overtaken by Aldi was everywhere.
The latest Kantar market share data has the big 4 still controlling 72.8% of the grocery till roll, down from 77.9% in December 2009, and trending slowly downwards.
This is still a huge chunk of the market, yet they seem to have stopped trying to really compete with each other and are instead chasing the bottom 10% of the market. I’m increasingly of the belief this is absolutely mad and they are, in effect, signing their own death warrants.
In my old job as a supplier, a buyer from one of the big 4 had the inevitable “how can my category beat the discounters?” discussion with me. He caught me in a fairly relaxed and candid mood. “Easy,” I said, “reduce your store space by 70%, thin out the range, remove all but a handful of branded SKUs and focus on Private Label”. It was easy to say this, even though I represented a branded food manufacturer, as I knew their entire business model was based around funding from branded manufacturers. Of course, the sledgehammer of customer-led ranging that is “SKU Rationalisation” is well advanced, so it looks like they are intent on destroying themselves from within.
I still maintain that we are largely a nation of snobs when buying our groceries. We like choice, we like nicely presented shops. The mults are trying to replicate the opposite in an effort to chase down a small part of the market. Even if Aldi, Lidl and Netto pick up 20% of the UK market – why wouldn’t you just try and ensure that you grow your share of what’s left? Surely it’s easier than taking them on at something they do really well? This is where we come back to Asda’s failure to capitalise on market conditions. They are known for price – someone should let them know that we GET that. Price gets you in, but the trick is to offer people the chance to trade up.
This is what Tesco used to be the masters at and Asda have the mechanics to do – Extra Special is a great premium brand, the concept behind Global Buying was solid – but they then ruin by trying to pretend they’re a discounter. This isn’t the first time they’ve done this – they attracted in lots of more affluent shoppers with their 3 for £10 permanent wine deal in the 2000’s, then annoyed them by taking the SKU count down by 15%!
But will someone break out of this herd mentality? Even if it is to try and take on the other growth that’s happening in the grocery market at the top end of the market! Waitrose are having the easiest ride of all. They aren’t a great supermarket with a fairly dull shopping experience and poor mid-market choices in range. Yet somehow, they’re being left alone to grow unchecked. OK, there are some targeted “upmarket” ranges being adopted by retailers with a hold on demographics, but it’s brand positioning that pulls people in that demographic in, not stocking five different types of balsamic vinegar. And if the big 4 are too obsessed with screaming about price and value, that’s not going to work.
Just targeting your range at the bottom part of the market is a self-fulfilling prophecy. It’s the kind of mentality that led Asda to only offer a Smart Price option for some commodities in their small stores some years ago. If you’re not going to be a pure discounter, you have to offer customers the opportunity to spend more and trade up. We’re in danger of forgetting that.
The big four need to accept that their pie is smaller than it used to – to stop it getting even smaller, they need to start getting back to taking lumps out of each rather than obsessing about an enemy they can’t do anything about.
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