Supermarket Losses as the Price War Rages On

08 May 2015|Added Value

It’s been a busy week in the UK. And you could be forgiven for missing any other news amongst the election media frenzy. But while the nation was absorbed with #GE15 both Sainsbury’s and Morrisons followed Tesco’s lead last week my announcing significant losses. Granted they weren’t in the realms of £6.4 billion but nevertheless highlights a common challenge within the retail sector.

Evidence of the price war taking it’s toll on the big four UK supermarkets Kantar Worldpanel declared our shopping basket to be 2.1% cheaper than it was last year; “lower costs are the result of both falling commodity prices and the ongoing supermarket price war, with all major retailers offering cheaper like-for-like goods.”

As it’s been discussed numerous times over the last year, discounters are clearly winning out here. With Sainsbury’s  first loss in 10 years announcing a £72M loss in the year to March, and Morrisons continuing despair of a statuary loss of £792M, it’s clear they can’t win on price alone.

So are the slogans we know so well ‘Every little counts’, ‘Live well for less’ and ‘I’m a cheaper Morrisons’ no longer cutting the mustard? The results suggest not. Meanwhile Waitrose is the only supermarket other than Aldi and Lidl to see an increase, namely 1.5%. Why? Because they offer something more than price to the consumer, which the other major supermarkets have been failing to deliver.

Kevin Evans, Insight Director at Added Value UK comments on the Sainsbury’s loss:

“Given the one-off write down this announcement should not be viewed with the same drama as Tesco’s recent loss, however the drop from previous years does show the pressures exerted by discounters on the big four is not a Tesco specific phenomena, especially given Morrisons falling profits announced in March. With pressure continuing to come on the cost of living, and especially with the uncertainty tomorrow’s election is likely to bring this should serve as a real early warning for investors that consumers are more than happy to look for alternatives and vote with their feet.”

Published in the Daily Mail.

While another comments on the Morrisons announcement of falling sales and huge losses:

“Similarly to the other big 4 supermarkets Morrisons is experiencing pressure from the growing discounters. Trying to compete with them on price clearly hasn’t been working for Morrisons with their ‘I’m Cheaper Morrisons’ campaign. Having once built a valuable brand based on offering fresh produce and a down-to-earth service at affordable prices, they need to define their purpose and offering to differentiate them from the competition.”

It is a challenging time for the big four UK supermarkets. With changing shopping habits and increasing numbers of consumers demanding true purpose these supermarket brands need to better understand their customers and make changes accordingly. Give shoppers a reason to spend their money.

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