Is this the winter of discounts-end for the Big Four?
The Christmas campaign battle has begun amongst the retailers. This morning Aldi invested in a major print campaign, just to promote its own television advert, so Tim Downs, director at Aberfield Communications examines how big the festive season will be for the grocers.
As Asda was the first of the main grocers to break its Christmas campaign during last weekend’s X Factor, it’s not hyperbole to suggest that this is a crunch Christmas for the big four.
With Aldi and Lidl continuing to take market share and experience double digit growth (over 17% each in the last quarterly figures), the big four are still largely trying to stop it slipping through their fingers.
Despite savagely slashing prices, which are like-for-like 1.7% lower than last year, consumers aren’t rushing out to buy any more products. According to Kantar this has taken a massive £1.5 billion out of the market in last 12 months, equating to a £58 average saving per household.
So, do any of them stand a chance of recouping this lost revenue over the festive season? Not if they carry on with the same discounter mindset.
Whilst you can’t call them rudderless ships, despite Morrisons, Tesco, and Sainsbury’s losing their chief executives in the last 18 months, they do all seem to still be adrift in a sea of cost-cutting and damage limitation.
If they continue to hack at prices, consumers will gladly accept these deals and consider it payback, without generating any loyalty whatsoever.
Going back to something I wrote about over 18 months ago, the big four are still not giving customers any reason to shop with them, other than price. They remain a blurred puddle of blue, yellow, green and orange that collectively manages to make them all, well, brown!
What I’m saying is that they lack any real discernible difference and ultimately this is playing into the hands of Aldi and Lidl, who remain the ‘smart’ choice, having snatched the mantle of everyday low pricing as opposed to slash-and-burn.
But on a brighter note, at least two are showing signs of trying a new approach, at least in non-grocery. Tesco has struck a deal with the Arcadia Group, which might see high street brands such as Dorothy Perkins, Burton and Evans in its stores. Asda has also decided to scale back its involvement in Black Friday with a new strategy around the annual consumer bunfight.
Both would be steps in the right direction and whilst they won’t necessarily affect profits this Christmas for reasons of timing and a failed loss leader still being exactly that, they hint at a move away from a strategy based solely on discounts.
Unfortunately, it might be too little too late to save them from shedding share. I predict this Christmas will be a repeat of last year; the big four will struggle to maintain their sales, whilst Aldi and Lidl continue to grow and Waitrose benefits from festive families dipping into that £58 they’ve saved for something a bit special.