The big four are currently facing unprecedented challenges as the grocery industry goes through a significant structural shift. Having spent the past decade engaged in a race to buy up as much land and build as many big hypermarkets as possible they now find that this isn’t how consumers want to shop.
Sales at the big superstores are in decline as shoppers eschew them for online, convenience stores and the discounters. Gone are the days when everyone would do a bit weekly shop at whatever their nearest supermarket was.
Now consumers are prepared to shop around to get the best deal and top up their weekly shop with trips to the store on the way home from work.
The supermarkets have tried to deal with this in a number of ways. They are opening convenience stores, investing in online and cancelling big store projects.
To see off the discounters they are cutting prices and launching multi-million pound marketing campaigns shouting about their new low prices.
The problem is that consumers aren’t listening. Sales at Tesco and Morrisons fell 3.8 per cent in the 12 weeks to 20 July, according to Kantar Worldpanel. Even Asda and Sainsbury’s, the most stable of the big four, are only just managing to keep pace with growth in the wider market.
Talking to shoppers it becomes clear that what they like about the discounters isn’t just the price. They find it easier to shop there, not having to choose between 15 different brands of baked bean or work their way around huge stores dedicated to every product imaginable, from clothes to sofas and dishwashers.
Simplicity is the key. Shopping at the big four has become complex and consumers now are after less choice not more.
The supermarkets so far have taken only small steps to attempt to turn around their stumbling sales. However such huge changes in grocery shopping require even bigger responses.
The supermarkets must stop focusing on projects and services that aren’t core to their business. This might mean taking some big decisions.
Tesco’s Hudl tablet, for example, has been a success, selling 500,000 units in the first seven months following its launch. Tesco is now planning a second generation tablet and a smartphone.
Tesco should be congratulated on its success here particularly as others have failed to make inroads, such as Argos with its MyTablet. However this doesn’t help its core grocery business and simply serves as a distraction.
The same with Giraffe. If Tesco and the other supermarkets want to lease out some of their spare space to cafes or restaurants by all means do so. But get other companies to run them like Asda is doing partnering with Barclays for banking.
In a tough market tough decisions are required. P&G has been roundly applauded for recognising its issues and tackling them head.
The supermarkets should take a leaf out of P&G’s book and refocus on the areas that are most important and where they can boost growth. Everything else should go.