As Ramadan draws to an end, we learn that the big four grocers have something over their discount rivals when it comes to offering choice.
A recent report published by the Local Data Company shows that discounters opened 1,587 units across the UK over the past five years, compared with just 570 units opened by traditional brands such as Asda and Tesco.
This is largely due to the fact that the big four cannot compete with discounters on price. Therefore mainstream supermarkets have to find new ground from which they can launch a challenge against budget rivals. The Islamic month of Ramadan serves to highlight one of the key areas where they can do just that.
Tesco has revealed that it expects Ramadan sales this year to hit around £30 million. Sales of key festive items such as chappati flour, rice, oil and dates are forecast to increase 70 per cent compared with last year. The company has launched charitable initiatives tied to the festive period to boost engagement with Muslim communities.
Asda is similarly advertising its selection of ‘authentic’ food items important to the Muslim community during Ramadan, and has witnessed a surge in sales of Ramadan-related products this year. Meanwhile, Aldi and Lidl’s festive offerings leave much to be desired.
“In specific festive periods, however, this larger assortment gives the big four a distinct advantage, because consumers are looking for specialised, niche goods”
The message for the big four is clear: you can’t compete on price but you are better in offering a wide, diverse assortment.
Discounters are able to keep prices low by restricting their product range. In terms of fixed cost, this gives them an advantage over mainstream supermarkets, whose large assortments are more costly and time-consuming to distribute to individual stores, and products tend to sit on the shelves for longer. This inevitably leads to reduced turnover per sq m of floor space.
In specific festive periods, however, this larger assortment gives the big four a distinct advantage, because consumers are looking for specialised, niche goods. This is especially true in the case of Ramadan, as the UK’s Muslim population grows steadily year-on-year.
This same principle applies as much for the big four’s superstores as their convenience outlets. Tesco and Sainsbury’s, for example, can tailor the product ranges at each of their Express and Local stores to cater for the ethnic make-up of the surrounding area. This is something that discounters, with their limited assortments, cannot easily do.
A typical Aldi store, faced with a business model revolving around a limited product range, is restricted to accessing roughly 2,000 products. Contrast this with, for example, a Tesco Express, which is able to choose from the entire Tesco assortment of more than 40,000 products. That is likely to include goods that match the preferences of local ethnic and religious groups.
Faced with fierce competition on price, the big four can no longer presume that their traditional customer base will remain loyal. Instead, they have to set themselves apart by making an asset of the features that are unique to them. This month, Ramadan will illustrate how they can harness their large product ranges to reclaim territory in a retail landscape which is more competitive than ever before.
- Professor Heiner Evanschitzky is professor and chair of marketing at Aston Business School