Mark Ritson: Aldi and Waitrose have strategic thinking in common

If you have been following recent events in Marketing Week it should have become clear that one of these supermarkets has a winning strategy and one, very clearly, does not.

Before we get into winners and losers, however, let us define the game. Too often in marketing we are unclear on what we actually mean by strategy in the first place. My favourite video on YouTube at the moment is a short three minute presentation from Harvard Business School featuring Roger Martin. The now retired Dean of the Rotman School of Management in Canada, and one of the great gurus of modern strategic thinking, lays out in a characteristically Canadian manner a very simple and straightforward explanation of what strategy is and how you create a good one.

“Given the array of intimidating and often confusing strategy tools out there, it can be hard to even know how to start,” he explains. “So here’s how. Think of strategy as the intersection of two critical dimensions: where you will play and how you will win there.”

It really is that simple according to Martin. You make explicit choices on where you will compete and then make sure your differentiated tactics enable you to win there. Attacking the same market as your competitors with the same strategy is, as he points out, a recipe for a financial “blood bath”.

Now, consider the strategic wisdom of Tesco’s recent announcement that they will launch “pound zones” in up to 300 of its stores. The zones, which will offer non-food bargain items such as beauty products and pet toys, are directly designed to counter the threat of the growing success of bargain retailers like Poundland and Poundworld.

The two key questions that Tesco has to answer are the strategic ones posed by Roger Martin. First, does Tesco really want to compete with the likes of Poundworld and German retailers like Aldi and Lidl? Ideally, of course, you would want to avoid this battle but Tesco’s market share of almost 30% of UK groceries combined with the growth of these discount operators means it’s almost impossible for Tesco to ignore the threat. They have to go toe to toe.

But where Tesco are coming strategically unstuck is the second question of how to win. Clearly replicating the prices and promotions and look and feel of the bargain retailers is a mistake. First because you cannot beat your competitors at a game they invented. Second, because as you attempt the impossible you switch off the majority of your shoppers who aren’t interested in Poundland and who came to Tesco because, well, they wanted Tesco.

Contrast this muddled strategy with the triumphant approach of Waitrose if you are still unclear on how to “do” strategy properly. At a recent visit to a new store in Swindon Waitrose’s Chairman, Mark Price, provided a sneak peak into how Waitrose are combatting the discount threat. Highlighting the retailer’s recent innovations such as wine tasting areas, free coffee and their extended product range Price declared; “We’re going to be everything that the discounters aren’t.”

And Price went further, noting that his major concern was not only the discount retailers but also how Waitrose took the battle to its more traditional rivals. “It is more about how we respond to Sainsbury’s and Tesco in terms of what they do with pricing,” he explained during the store visit.

It’s clear that Waitrose is winning the strategic retail war and is set for a period of unprecedented success. First because it has identified a truly different way to complete and second, because traditional rivals like Tesco are losing their own focus as they attempt to combat the threat from below.

In a recent Which? survey of 7,000 shoppers Aldi and Waitrose finished bareley a percentage point apart at the top of the table for ‘most satisfying’ supermarket chain. That might seem a curious result given just how different these two retailers are. But that’s the point. The one thing the two do have in common is strategic differentiation. Both know where they want to play, and how they are going to win.