Interviewed last week, former Sainsbury’s CEO Justin King spoke about his legacy and argued the supermarket’s strategy over the past few years leaves it well placed for future challenges. One comment that stood out was there “is no ‘death’ of the weekly shop.” In other words, according to Mr King, consumers haven’t fundamentally changed their shopping habits.
This is interesting as it runs counter to much of the industry mood music. Headlines suggest there has been a seismic shift toward ‘little and often’ shopping in the UK, with consumers buying only what they need, when they need it. No longer is the big weekly shop a national institution. This trend is often mentioned in the same breath as the challenges faced by the big four.
So who is right and where should supermarkets and suppliers be directing this attention? The truth is in the numbers.
“This is a time of seismic change - but not as it’s being reported”
In 2010, at the height of the recession, the average British household made 221 trips to a supermarket each year. How many more trips did they make in 2014 following years of change? Not a single one; we still visit 221 times. A very similar trend can be seen in how much shoppers buy on each visit. The 10.5 items per average basket today is almost identical to what it was five years ago. Nor do they have a more extensive repertoire of shops that they visit. In 2010, the average consumer visited 5.1 supermarket fascias over a 12-week period; today it is 5.0.
When the number of times we shop, how much we buy and our repertoire remains stable, can we really claim a revolution in shopping habits? I think not. So what is happening? Why is the market seemingly in such flux if customers are fundamentally doing the same thing they always have?
Among several factors, there are two major trends which are driving real change. The first is an evolving market dynamic created by the rise of discount retailers Aldi and Lidl. Back in 2010 they held a combined 4.5% of the grocery market; today that figure is 8.3%. This equates to a movement of £4.2bn per annum. Shoppers are visiting the same number of stores, but discounters now form part of their repertoire and this means the middle of the market has become squeezed.
The second, more short-term, shift is that of market stagnation. Shoppers are buying as many products as they did in 2010 but fierce price competition means they now pay less for them than they did earlier in the year. For the first time this century, the UK grocery market has entered deflation, with the average shopping basket costing less than before. Falling market share is just about bearable when the overall market is growing, but hugely damaging when it’s not.
This is a time of seismic change for the UK grocery market - but not in the way that is being reported.
Mr King is right. Supermarkets need to innovate and react to shifting shopper demands, but it’s important to acknowledge that some core retail fundamentals remain in place. The more things change, perhaps, the more they stay the same.
Fraser McKevitt is head of consumer and retail insight at Kantar Worldpanel