The UK retailing environment has always been hotly contested, and right now the hottest spot is pole position. Sainsbury’s new strategy and heavyweight marketing looks as if it is at last succeeding in its attempts to claw back market share from Tesco.
The latest figures from Taylor Nelson AGB Superpanel (the industry’s leading barometer) indicate that Sainsbury’s has begun to rebuild its market share. It has gone from 20.1 per cent in May, to 20.6 per cent in June, and 21.1 per cent in July. Tesco has lost 0.8 per cent share points to 22.0 per cent in the same period.
Last year was the first time Tesco edged its market share ahead of Sainsbury’s, according to AGB. Data showed Sainsbury’s core share of the 2.8bn packaged grocery market to be 18.9 per cent, while Tesco was at 22.6 per cent.
Earlier this year, the City was criticising Sainsbury’s for allowing Tesco to get so far ahead of the game in terms of customer service, loyalty and perceived price competitiveness. Sainsbury’s was also accused of not promoting itself sufficiently – although it did run similar customer initiatives to Tesco, such as a free breakdown service for customers shopping at its store in association with the AA.
Poor marketing innovation has put Sainsbury’s in the shade compared with Tesco and its Clubcard over the past 12 months.
But the tide appears to be turning. Key to the new strategy has been the launch of Sainsbury’s Reward card, backed by higher levels of advertising, and by senior management changes.
Just seven weeks after the initial launch, over 5.5 million customers have signed up for the Sainsbury’s card. Customers are now joining the scheme at a rate of about 100,000 a week and the original estimate of 7 million cardholders will soon be exceeded.
The turn of fortune for Sainsbury’s can also be explained by the heightened levels of advertising expenditure. So far this year, the supermarket multiple has spent 16m on advertising against Tesco’s 9m and maintained a 1996 Share of Voice (SOV) of 16 per cent, versus Tesco’s SOV of nine per cent.
Sainsbury’s advertising spend was increased specifically for the launch of its loyalty card, and it outspent Tesco more than seven times in June with a SOV reaching 25 per cent, according to Register-MEAL.
If Sainsbury’s sticks to its guns, its forecasted spend by the year end will once again be double that of Tesco. Tesco has let its advertising spend slip, in line with its proposal to concentrate more on promoting itself through the Clubcard.
The autumn and winter season is traditionally a time for all the multiples to increase advertising activity with several new campaigns planned. Safeway has been high- spending on its “Molly” campaign, Somerfield has been preparing for its Stock Exchange launch, and Asda has been performing well in its “Pocket the Difference” campaign.
Sainsbury’s also last week launched a price campaign, Autumn Value, involving special offers on 700 products to boost volume and compete in a price war with Tesco’s recently launched Unbeatable Value range. However, the impact of these promotions will be to boost short-term volume, rather than building brand empathy.
Heavy above-the-line advertising spend is the strongest way to build brand empathy and Sainsbury’s has the characteristics of a brand leader.
However, in terms of store square footage, Sainsbury’s is still well behind Tesco. Acquisitions would be the smartest way for Sainsbury’s to even the balance.
There is sure to be a dogged battle through the autumn and in the run up to Christmas, with the two multiples both seeking pole position, in share terms. Sainsbury’s is clearly back in the driving seat, and is still the most profitable retailer, with average sales per square foot higher than Tesco’s.
If profitability can be plugged back into outstanding incentives for the consumer, new winter advertising and new integrated marketing initiatives, then Sainsbury’s could well be back in pole position and on the high ground by Christmas.