Tesco will remember 1995 as an historic year. The chain has managed to add nearly two percentage points to its market share according to AGB data, and in the process has knocked Sainsbury’s off the number-one spot as the nation’s top supermarket retailer.
The headline market share figures tell one part of the whole story. This week, as part of Marketing Week’s regular analysis of the retail market, we use AGB Till Roll Shop Data to look behind the headlines to find out how Tesco managed to pip Sainsbury’s to the post.
Tesco’s Clubcard seems to have finally tipped the balance. In March, only one month after the Clubcard was launched, Tesco’s market share overtook Sainsbury’s for the first time, putting Sainsbury’s on the defensive (see chart one). These figures also reflect the first contribution of the newly converted William Low stores in Scotland, which ratcheted up the chain’s national market share by 0.8 per cent.
Whereas Sainsbury’s market share has declined gradually during the year, Tesco’s has continued to grow, reflecting the addition of new William Low stores and the magnetic pull of Clubcard.
It is an axiom of loyalty marketing that it is cheaper to hold on to your existing customers than to bring in new ones. Loyalty cards tie in existing customers, and encourage them to spend more, goes the logic.
Tesco’s launch of the Clubcard has turned this dictum on its head, as the figures in chart two demonstrate. The effects of the launch ought to be slow, attracting new customers over time. But the data shows how the chain’s market share began to swell immediately after Clubcard was introduced.
This not only demonstrates how effective the Clubcard has been in the short-term but the considerable advantages Tesco has had in being the first multiple supermarket group to launch a card nationally.
Tesco has increased its market share by value by more than two per cent on its pre-Clubcard market share from 19 per cent in January to 21.2 per cent by September. Superpanel puts the total figure for sales through grocers as high as 30bn, so this two per cent could represent up to 600m in sales.
The Clubcard seems to have increased the frequency of shopping visits to Tesco stores. Chart two shows how the number of trips made by shoppers to Tesco stores has increased by 16 per cent.
So why are shoppers tending to visit Tesco more often? The data in chart three shows that Tesco shoppers tend to spend more on shopping for each trip than Sainsbury’s shoppers.
There are two main reasons for this. Tesco tends to have larger superstores, given that the greater part of its growth came in the
Eighties, a time when superstore development was at an all-time high. And Clubcard encourages customers to spend more when they shop at Tesco.
Superpanel also shows how Tesco has managed to increase its loyalty over the past year. Sainsbury’s shoppers, on average, spend 45 of every 100 of their total grocery spend at the store, and this has remained unchanged over the past year. Tesco has increased its figure from 43 to 46 over the year.
Equally significant is the growth in Tesco’s primary shoppers. These are people who spend at least half their total grocery budget at a given store. Tesco’s has increased its number of primary shoppers from 16.3 per cent to 18.8 per cent over the year.
The coming months will see more activity from Sainsbury’s on its loyalty card, which is expected to go national by the end of the year.
The effects of its customer service advertising initiative launched in June has yet to feed into the long-term picture. The chain is rolling out a further 60 petrol stations; it could also spring some surprises on its pricing.
How can the chain attract back higher spending customers from Tesco? The launch of Sainsbury’s own loyalty card could go some way to neutralise Tesco’s Clubcard and win back some of the custom it has lost. But it will be very much a defensive move, and City analysts say Sainsbury’s needs to go on the offensive to regain the number one position.
Sainsbury’s could be forced into acquiring another chain to boost its market share. It may also be tempted to launch further initiatives on price and service.
There are still plenty of areas where Sainsbury’s can seize the initiative from Tesco, and become the number-one supermarket retailer once again.