I often wonder at the micro-price management we see in this industry.
It’s not just the cavalcade of constantly changing promotions: if you study, week in week out, the prices in our weekly Grocer 33 survey, you regularly see price changes of as little as a penny.
Multiply this across 20,000 products across thousands of stores, and it’s no wonder Sir Terry Leahy was so preoccupied with the low-cost model of the discounters at the start of the recession.
Yet while the threat posed by Aldi and Lidl has receded over time indeed, with its now-heady mix of promotions, vouchers and loyalty card points, Tesco was ahead of the market this quarter two alternative models are proving very resilient.
As this week’s Grocer 33 showed, with Waitrose offering not a single price promotion while Asda is running multibuy deals by the bucketload every week, Waitrose is currently the closest this market gets to a true every day price model. The difference being this is EDHP, or every day higher prices!
But joking aside, it’s working for Waitrose. And the continuing success of the single-price point retailers is equally intriguing. As we note in this issue, the level of round-pound deals in the multiples is again up year-on-year. But the number has actually fallen in the last month, giving rise to the possibility that, with the VAT rise coming in January, supermarkets may now cut back on round-pound offers.
So what happens to 99p Stores and Poundland? Both have benefited from an appealing business model, together with the entrepreneurial flair of their owners, but also a little ladyluck, as the temporary lowering of VAT to 15% effectively helped fund expansion (96.89361701p Stores doesn’t have the same ring, does it?).
And the answer, it seems, is to put the screws on suppliers. How very reassuring it must be to know that, not only do you NOT have to micromanage your prices every week, but you are now big enough to dictate terms.