So it comes as no surprise to see the opening shots in this year's price war have been fired early. Asda was quickest on the draw on the second day of the year, unveiling over 1,000 Rollbacks, including 300 items in the frozen and household categories cut to £1. Tesco returned fire with price cuts and promotions on 3,000 lines - discounts worth a total of £100m, according to the retailer. And Morrisons says it has slashed thousands of prices on staple items to help shoppers restock their cupboards after Christmas.
There's nothing unusual about a January sale, but the current state of the economy suggests that this year's price war will shape up very differently to battles of old. Discounts look set to last significantly longer than they would in any typical January sale and, as many reductions are on high-volume everyday items, the cost of the promotions is now steep. Winning this pricing war will take more than slick adverts and steep discounts. To triumph, a retailer will have to fund these promotions, retain customers seduced by new deals and, most importantly from a shareholder's perspective, maintain the bottom line.
The year's first promotional offerings all focus on staple household lines, rather than the customary January fire sale on excess Christmas gift stock.
One reason is that discounting activity before Christmas was so frenetic there is little scope for prices to go lower. Many gift lines were discounted up to 90%, while featured space promotions were up 28% on last year, running at more than 2,000 lines every week across the main multiples.
Many retailers also used front-of-store pallets to showcase offers - notably on alcohol - more than in any previous year. With no more room to expand the number of featured-space promotions and little scope to discount items further, a change in tactics was essential.
Asda leads the charge
Asda, which sparked the latest pricing battle, is the only one to have outlined its strategy in detail. Its Rollback savings all have a minimum term of 12 weeks (six weeks for fresh produce), as do its £1 deals. It is also committed to having at least 100 frozen food lines and 200 everyday household goods rolled back to £1 at any one time for the whole of 2009, says a spokeswoman. The price cuts are not funded by contributions from suppliers, she says, but are paid for by cuts in the business's operating costs.
"As you'd expect, we are leading prices down at the start of 2009," she says. "And the other supermarkets are following our lead. We're proving we are as focused as ever on price."
But just because Asda is the first on the battlefield, it's by no means guaranteed victory. Tesco has hit back at Asda's adverts comparing the prices of the two rivals, with its own ad campaign, claiming that it was cheapest for 1.1m baskets, while Asda claims it was cheapest for 645,000.
Morrisons too has also entered the fray, with a series of adverts declaring that it, in fact, is Britain's cheapest retailer. The battle for price perception is every bit as fierce as the in-store war, and looks set to run for most of the year.
In it for the long run
Given this year's January sale in the supermarkets started well in advance of Christmas, it was clear that it would last significantly longer than the usual four to six weeks. But Asda's 12-week commitment means a more protracted discounting battle between the big four is inevitable.
"This year doesn't mark the start of something new, but does represent a new phase of the ongoing price war," says Kay Staniland, MD of promotions consultancy Assosia. "Asda's shift in approach is particularly clever. The three-day 50p deals that were running last Autumn were very short-term, perhaps gimmicky. Here, it has started a more long-term approach by guaranteeing certain offers will be there week in, week out. That could prove quite an effective way to secure repeat custom."
The supermarket price war has gone through distinct phases since it began in earnest in the middle of 2008, says Staniland. Early on, there was a focus by several retailers, particularly Tesco and Sainsbury's, on own-label and tertiary brands, and by all of the big four on staple, everyday items. This was sidelined somewhat in the run-up to Christmas, where more typical featured-space promotions on luxuries, confectionery and alcohol took precedence, albeit on a much larger scale than in previous years.
This year marks the start of a third phase, once again focusing on staples as customers restock after Christmas. The twist, however, is that brands are returning to the promotional mix in a bigger way.
"Consumers do like their branded goods," says Staniland. "There's a limit to how many people will be attracted by own-label and discount ranges, and a certain reassurance to brands. Steps to keep branded goods affordable are likely to prove popular."
Finding the funding
Of course, all these promotions need to be funded. Attempts last year to increase promotional contributions by suppliers, or cut costs, met with significant resistance and attracted negative publicity for the multiples. The financial difficulties now facing many suppliers make negotiations over additional contributions even more difficult and funding promotional activity while maintaining profitability more challenging.
One way retailers are scaling back their spend is by cutting the level of discounting on high-profile featured space offers on gondola ends and in the power aisle. The typical saving on such offers has fallen from 38.3% in the first week of 2008 to 32.4% in 2009, according to Assosia data. This suggests that some of the funding for new savings on everyday items is coming from savings elsewhere in the promotional budget, although some retailers - particularly Tesco - have significantly more featured space offers than this time last year.
What differentiates this year from last, however, is the effect of the dramatic weakening of the pound. Just as retailers are signalling fierce competition on price for much of 2009, the weakness of sterling has piled more pressure on costs. The sharp falls of the pound against the dollar and euro have significantly pushed up the cost of imported food and ingredients, and many analysts predict it is merely a matter of time before the pound hits parity with the euro.
At best, this will dash hopes of significant falls in the cost of food. At worst, it could force up food prices at a time when consumer incomes are set to fall.
The challenge for supermarkets will be protecting their margins amid sustained promotional activity - simply beating rivals on price would be a Pyrrhic victory indeed.