Morrisons chief executive Dalton Philips warned that supermarkets are facing “their biggest challenge since the 1950s” with profound changes in how customers buy. He is not the only one to notice – Sir Philip Green announced this week the launch of new supermarket competitor BHS Food, promising to undercut rivals on branded goods by 10 per cent.
There are a couple of key shifts in the supermarket world that you may recognise in your own sector. First, a group of new entrants have disrupted the traditional players. Budget stores Aldi and Lidl have gained traction since the beginning of the economic downturn. Both are seen as providing good quality and value for money. These days, Aldi’s Lacura beauty brand makes it on to the style pages of magazines.
Instead of being the stores for cash-strapped consumers, Aldi and Lidl have reinvented themselves as the brands where smart shoppers get supposedly superior products at reasonable prices. That opens up their proposition to wealthier consumers too.
Second, established brand equity is no longer enough. Sainsbury’s run of nine years’ sales growth ended in March this year. Going round Sainsbury’s, shoppers are met with familiar brands they recognise – Cadbury chocolate, Evian water and Weetabix cereals to name a few. Meanwhile, Lidl and Aldi shoppers find parenting brand Mamia or the Suddenly perfume range on shelves. Consumers are no longer put off by unfamiliar names; they are switching in droves to unknown brands.
Third, digital isn’t the only route to success. There is often an assumption that switching everything to digital – from retailing to marketing – will cut costs, reduce headcount and provide the crucial business advantage.
True, except while the Big Four supermarkets have all developed online shopping businesses, Aldi and Lidl have not. Of course, these two are not nearly as large as their competitors but all their success is coming from physical stores. Your strategy has to be about more than digital to succeed.
It seems that 2014 will be the year of the shift. Are you ready for it?