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How the ‘big four’ can fight back

Once stigmatised as down-at-heel supermarket chains, Lidl and Aldi have reinvented themselves by convincing customers their aisles are stacked with superior quality products at prices the UK’s big four of Tesco, Sainsbury, Asda and Morrisons struggle to match.

That proposition enabled the discount duo to steadily gain market share as consumers, whose spending power had been curbed by the recession and prolonged wage stagnation, became more price-conscious.

Yet research shows price is only fourth on shoppers’ priority list – behind proximity, range and habit - and with over 90% of discounters’ customers also visiting a higher-end supermarket, there’s a chance for a Big Four comeback.

To engage in a pure price war would be foolish – the discounters are doing just that, achieving 5-25% discounts versus the conventional chains, who on average would forego £1 billion in profits to reach parity.

Instead, the multiples need to remind customers of the advantages of shopping at one store with a full range, better service, equal or better quality and comparable prices. They also need to ‘myth-bust’ the perception that the discounter’s products are comparable.

Newton’s research of 40 people tested products from eight supermarket ranges (including dairy, confectionery, juice, produce, meat and fish), comparing both the multiples’ entry-tier and mid-tier products to Aldi’s and Lidl’s. The results showed a greater percentage of people still ranked the multiples’ entry-tier and mid-tier products above those of the discounters. Asda’s cheddar cheese was the cheapest and topped taste tests – yet customers are unaware of the actual difference in quality.

Tesco’s farm range has begun to give shoppers a reason to feel passionate about the products they buy from the store again, in the same way they might recall an unexpected bargain obtained from a discounter to their friends over dinner. Positioned as higher quality than Tesco’s previous entry-level tier and priced to compete with discounters, the farm range makes shoppers feel enthusiastic about their buying decisions again.

If the full facts around quality of product and price are promoted to customers, along with the existing areas around range and habit where the multiples are already superior – how can they continue to lose market share?

To read more, visit beatthediscounters.com and download Newton’s full ‘Beating the Discounters: myth-busting and the £4billion opportunity’ report.

This was posted in Bdaily's Members' News section by Andrew Hawes .