A greater focus on pricing and price matching is allowing the UK's biggest grocery retailers little room for differentiation from each other, according to Ed Garner, communications director at industry analyst Kantar Worldpanel.
According to Garner, this pricing emphasis has left in-store theatre and own-label ranges as some of the only areas left to help retailers stand out from the crowd.
'The big four retailers are all banging on about price – the Big Price Drop, Brand Match, Price Guarantee, etc – and therefore the shopper’s perception is that there is no need to switch shops,' he told the Chartered Institute of Marketing’s Food, Drink & Agriculture (CIM FDA) group. 'That only leaves two differentiators for retailers to benefit from – the way they structure their in-store retail theatre, and branding of their own-label ranges.'
Garner cited the astounding growth of own-label in the UK, which is the biggest private-label market in the world, accounting for 45 per cent of total grocery sales.
Both economy and premium own-label ranges have been growing at similar rates during the recession – reflecting the difficulty in averaging out the tricky UK retail market, where the same shopper is just as likely to put a value line in their basket at the same time as a premium private-label product.
It is the polar ends of the market that have arguably enjoyed the greatest success since the start of the recession, said Garner, with discounters Aldi and Lidl registering 20 per cent year-on-year growth, while premium retailer Waitrose has been experiencing 8 per cent year-on-year growth.
Waitrose has benefited from a loyal customer base, many of whom have been more resilient to the economic climate than other shoppers, while Aldi has been generating strong growth thanks to new store openings and the disappearance of Netto from the marketplace.
When it comes to the big four, Garner indicated that Tesco remains under pressure, while Asda’s share has flattened out as its acquisition of Netto has come to fruition. Sainsbury’s is celebrating a ten-year high in its performance, while Morrisons is suffering.
'The issue with Tesco is that it is so big – nine out of ten of us have shopped there in the last year,' he explained. 'The only way for it to grow is to take more money from existing customers, either by promotions or encouraging them to trade up.
'Claiming it was Britain’s Biggest Discounter was the worst thing to do – it already had a huge market share, so by cutting prices it ended up actually taking less money,' Garner added. 'Low prices are in Asda’s DNA, but its period of positive growth has now flattened out with the conversion of Netto stores.
“Sainsbury’s has managed to achieve a great balance, recently returning to its poster image of ‘value’ coupled with ‘values’, of which it lost sight during the 1990s. In fact, sales of Sainsbury’s Basics range are actually higher than Asda SmartPrice’s.
'Despite strengths in areas such as craft butchery and fish, the overall picture is challenging for Morrisons, said Garner. “It is the only retailer of the big four not to have a presence in online and convenience retailing – two huge areas of growth.”
Online grocery shopping offers strong potential, registering growth of nearly 20 per cent in the last year.
'High-income households are spending 10 per cent of their grocery budgets online,' added Garner. 'It will be a big engine for growth in the next few years.'
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