One of the many things we’ll miss about Sir Stuart Rose when he retires next year is the frequency with which he says “value is a function of price times quality”. Never has that been truer than today.

One of the many things we’ll miss about Sir Stuart Rose when he retires next year is the frequency with which he says “value is a function of price times quality”. Never has that been truer than today.

Aldi’s astonishing collapse from making £93m profit to £54m loss in the space of one year is a sign of how the novelty value of hard discount retailing has worn off. Food is where it’s most noticeable - Lidl and Netto have been going through the mill as well - but in fashion and general merchandise too, what’s clear is that just being cheap is not enough.

The problem for the discount grocers wasn’t product quality - many of their private label lines are excellent. It’s just that UK shoppers are spoilt. They can shop at any of the big four and barely notice the difference in price from the discounters. And they get a nice store environment and an assortment of branded and private label products too, two elements usually lacking with discounters.

Beyond food, there is also evidence of a flight to quality. In general terms, if people are going to spend what is a limited disposable income, they want to do it in decent surroundings and they want the product to last.

That’s not to say that the Primark phenomenon is going to disappear. Its value proposition is so strong and while its products might not last forever, they’re bang on trend. But value players without scale or a unique point of difference will find the going increasingly hard, especially as sourcing costs rise.

The easy gains to be made from the demise of Kwik Save and Woolworths are history now, and value specialists won’t succeed by just being cheap - they’ll need to be great retailers too.

Mind the Gap

Gap’s now-ditched new logo embodied none of the characteristics of the brand - as one tweeter put it, it made it look like a software company. But even so, the online furore about it was extraordinary.

All the fuss won’t have stopped anyone buying a pair of chinos, and in fact has probably helped Gap avoid making a foolish decision. But it has also made the company look leaden-footed and pompous. In an age where every customer can have their say, retailers need to be on the front foot because, rightly or wrongly, their customers feel they own the brands they shop with.

tim.danaher@retail-week.com