A perfect storm or a time of opportunity

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A perfect storm or a time of opportunity

A study of what is happening to the British food retail sector may indicate what could happen to other retailers in other parts of the world. Until 2014 the British food retail sector was reasonably stable with a clear market leader with one retail pound in eight retail spent pounds being used to purchase goods from that retail leader. It was a company that aimed to please the whole consumer market. 2014 saw all that change.

In 2014, another supermarket company that constantly wins awards for its customer service, a global giant developing a superior online offer and two German leading retailers who have aggressively developed the market based on providing the cheapest price, took market share from the previous market leader.

The result is a very confused market and probably a very confused consumer. It has also meant reduced sales for the big four supermarket leaders with one of them releasing a quarterly drop in sales of 2.8%, whilst one of the German supermarkets announced a profit increase of 65%.

What do you do in the perfect storm?

On my recent visit to the UK, the newspapers there seemed to be full of adverts and articles that discussed the various strategies. These included:

  • Mentioning the competition in newspaper adverts and in your car park. In the “old” days the strategy was never to mention your competition within hearing of the consumer, now the reverse is happening. On 2 October I came across the following adverts and articles – A full page newspaper advert from ASDA that went “Sainsbury’s axes Tesco from brand matching and targets ASDA as ‘Value Benchmarking’ …Thanks Sainsbury’s..you’re right we do have low prices.”
    The Sainsbury’s supermarket next to where I was staying had a large banner at the entrance to the car park stating they would brand match with Tesco. Personally I am not convinced promoting the competition in a price brand match is a good marketing strategy. In my conversations with consumers in the UK the reaction was that the consumer is being encouraged to shop around all the supermarkets and that loyalty is not a factor anymore.
  • On the same day Morrisons, one of the big four supermarkets, released a press article stating they will price match Aldi and Lidl supermarkets and they released a loyalty card “Our Match and More “card. The emphasis is to spend large marketing budgets to match price with the discount supermarkets, a strategy that will result in a completely different looking retail scene in years to come.
  • Whilst the big supermarkets have taken a price strategy, Lidl have released a series of TV commercials promoting their business as providing local fresh food that is as good as a farmers market. Farmers markets in the UK now look on the discount store as the competitor as they are now in the fresh food sector and offering the same local quality.

The reverse side to this coin comes from the music industry. HMV are one of the oldest retailers of music. Until recently their retail model was slowly dying as consumers purchased more music online and “Record” shops were becoming a thing of the past. Senior management decided action had to be taken and the result is that HMV have redesigned their stores and are promoting themselves as the source of music expertise. On my visit to their flagship store in Oxford Street, London, I was impressed with the depth and width of the range on offer, and the way the team, who were music fanatics, engaged and interacted with consumers. Plus they used simple ideas like “Trending Now ” signs that focused the consumers eye on specific products .

The Future

None of us can predict the future, but we can observe what is happening in the market place and retailing in the UK is moving rapidly and is worth watching.

One option is to fight the price war, some retailers will win and some will lose. An alternative is to own the category, again some retailers will win and some will lose. In my opinion, in the UK, many retailers are confusing consumers and as a result they are losing market share.

Now is a time to work out what your retail strategy should be and then being brave enough to stick to the strategy in difficult trading times. There is still room for the entrepreneur, but you must have a clear vision and be able to communicate that to the consumer.