Imagine a perfect grocer: Using efficient supply chains, it ensures the products that customers want are available, offers high-quality private-label products, and has sophisticated loyalty card programs for customers. This very scenario describes the traditional state of U.K. grocery retailing, but even these ideals are entering into frenzied price competitions in the face of the floundering economy. Sainsbury, Tesco, Morrisons, and Asda may be posting strong profit and sale growth figures, but they have done so with a completely new strategy.
Walking into a U.K. grocer today, consumers confront a ream of clearance signs, along with blaring advertising that compares prices against those offered by competitors. Grocers that have built their image and reputation on their high quality are functioning out of the fear that their customers will start flocking to discounters.
Furthermore, comparison shopping is much easier in Britain, compared with in the United States, because U.K. grocers provide well-developed online platforms with consistent prices. At 9:00 am, Asda receives an e-mail listing the prices of every item sold on different grocers’ Web sites; if it finds it is more expensive on any product, it immediately alerts stores to adjust their prices.
To deepen the price battle, grocers are pressuring vendors to share discount losses with them, threatening that if they do not, the grocers will stop buying from these suppliers. Duchy Originals, an organic food company, removed its products from the shelves of a grocer that wanted to cut the price of sausage by half and decrease cookie prices by 40 percent.
Sainbury’s slogan has long been “Taste the Difference,” in reference to its high-quality products. But during the course of these bloody price wars, it has changed its slogan to “Spot the Difference,” referring to its prices. Not to be outdone, Tesco proclaimed itself “Britain’s Biggest Discounter”—though the company quickly pulled that slogan after the Advertising and Standards Authority ruled it was likely to mislead customers.
1. Why are Britain’s grocers reverting to price wars?
Cecile Rohwedder, “U.K. in Price Fight, and It’s Drawing Customers,” The Wall Street Journal, August 10, 2009.