The crisis in grocery will not be solved by simply dropping prices.
Well, what a few weeks in the grocery market it’s been. First was the carnage wrought on the listed food retailers prompted by the losses and profit warning from Morrisons.
Fair play to Dalton Philips, he was remarkably upfront about the pain being inflicted on his business by the German discounters.
He was open about what Morrisons needs to do to exit this period of turbulence in a better place. Notably, fewer promotions and fewer products were among the remedies.
This is a resonant theme. Shoppers don’t just invest money in grocery shopping, meaning that there is much more to value than price. They also invest time and invest emotionally in the
With supermarkets sometimes seemingly doing their level best to make the shopping journey as complex and as frustrating as possible, it is little wonder that the discounters - with their small stores, limited assortment and clarity of pricing - are winning. Sure, the low prices help, but I can’t help thinking that it is Aldi and Lidl’s lack of complexity that underpins their appeal.
It was Morrisons’ pledge to be more aggressive on price that caused the collapse in share price of other retailers. Not so much in and of itself, but more because of fears over the reaction it might prompt, notably from Tesco.
One of the factors that may have been overlooked in the fevered column inches over an impending ‘price war’ is that prices don’t matter as much as they used to.
Most shoppers get the gist of who is the cheapest supermarket and who is the most expensive. The others fall somewhere in the middle. With this topography of value in mind, other factors such as location, service and ambience come into play. All the price-match stuff further dilutes the pre-eminence of price in decision-making.
I liked Sainsbury’s response to the whole affair - if the others head down the price war path, then that leaves us free to differentiate further. Hopefully a sentiment that might avert a race to the bottom.