Britain’s supermarkets are reducing their product lines, looking for cost reductions, and inspecting each other’s stores to check prices and goods as they try to stay one step ahead of the competition during the roughest economic times in decades.
Like retailers across the world, UK grocers including market leader Tesco (TSCO.L) and No. 2 Sainsbury’s (SBRY.L) are struggling with the soaring cost of supplies, and a shortage of key products and workers, and cash-strapped consumers.
But they enter the downturn on the back of an already lengthy period of cost-cutting due to fierce competition, forcing them to look for new ways to make savings while increasingly using data to predict customer reactions to change.
“There is some evidence of customers shopping (more) to own brand and also areas like frozen are increasing,” Roberts said, on a tour of a Sainsbury’s store in Richmond, southwest London. “People are looking at making sure that they don’t incur any waste.”
Price Match
Roberts said the public’s perception of Sainsbury’s value had improved after it matched the prices of 250, mainly fresh, items to those at Aldi, while another scheme covering 1,800, mainly branded, products hold prices for at least eight weeks. Its Nectar Prices scheme also provides personalized offers.
“The fundamental here is that we have brought prices down on the products customers buy most of,” he said.
Sainsbury’s, which has also revived its “Feed Your Family for a Fiver” campaign that was first launched in 2008, says it is winning market share in terms of volume sold and that its overall prices are rising 1-2% less than the broader market.
To stay competitive, Sainsbury’s is spending 500 million pounds over the two years to March 2023 to keep a lid on prices, but that comes at a cost.
In April, it joined Tesco in warning of a drop in profit this year and its shares are down 23% so far in 2022.
Its guidance takes account of the major hike in energy bills that is due to arrive in October.
“Customers are going to be watching even more acutely how much they can afford to spend in the autumn and so we’ve got to be prepared for that,” said Roberts.
Noting that Sainsbury’s pays nearly as much tax on its properties as it does in operating earnings, he encouraged the government to take additional action to assist.
He said that speeding up the business rate reform would save money that could be put back into raising prices. Tuesday brings an update from Sainsbury’s on the first quarter’s sales.
