In hard economic times, consumers are after the cheapest price, exemplified by Asda’s ‘Saving You Money Everyday’ and Tesco’s ‘Every Little Helps’, which clearly show that price comes first.
Grocers are engaged in a fierce price-slashing battle, and for the time being, the emphasis on creating an engaging, high-quality consumer experience has fallen by the wayside.
Despite these rigorous retail price reductions, not every retailer is putting price as a high priority. Some have other game plans.
Waitrose, for example, along with the likes of Sainsbury’s, avoids going ‘all-out’ on the price war by playing up areas such as service, quality and shopper experience.It’s difficult to tell whether the price battle is really working for Asda and Tesco, because the reality is that they are always going to be competitive as per their strategic agenda.
The question is how far it can go in its current guise. I went into Tesco the other day, and there was a bumper packet of crisps priced at 98p. Underneath, in big words, was written ‘Asda 99p’. That is seriously going to war!
In this instance, consumers don’t necessarily care about the fact that they’re saving 1p on a packet of crisps, but it does put Tesco’s commitment to the price war at front of mind. In this case, the amount of space given to that message is a brand manager’s dream in terms of how clear it was, the size of it, and the PoS exposure.
However, I believe that, despite these price drops, Waitrose will come out best. Why? Because it’s not wholly involved in the price war and it isn’t changing its strategic direction. For consumers, there are no sporadic comms stating that a particular butter brand is cheaper than it is at Tesco. That’s not what Waitrose is about and people shop there for that very reason.
Arguably, the only price comparison done by Waitrose is its Essential range. A shopper would usually go to Waitrose to buy good quality meat or fish, but then head to Asda or Tesco to buy their essentials. So Waitrose launched its Essential campaign, price-matching 1,400 key products.
Primarily, major retailers want to be price competitive and get shoppers through their doors. Yet, despite this sales drive, Tesco’s performance was a few per cent down last quarter, compared with Sainsbury’s, whose was a few per cent up.
This could be a good time for Tesco to ask itself whether the price match is actually working. Quite simply, it’s not winning against its competitors at the moment. With the all-important Christmas trading period just round the corner, it will be interesting to see who the winners are.The future state of the retail price war will reflect and follow the future economic state of the country.
For instance, a serious focus on price-matching started when the economy dived in 2008, and now that we’re double-dipping it is becoming even more prevalent. Economically we’ll come out of that over the next two or three years, or perhaps even longer, and when we start recovering, it is highly likely that multiples will focus on diversity of product.
Both Tesco and Asda, for example, will focus on becoming a one-stop shop selling everything from petrol to bank accounts.
Simon Crouch is head of retailer engagement at RPM