While Morrisons’ performance is down slightly on its spectacular results over Christmas, when like-for-likes rose more than 9 per cent, the grocer has delivered a good set of figures. Bolland remains cautious, though, and has this week slashed prices on 2,000 products, adding that “consumer confidence is at an 18-year low”.
The price cuts are across a wide range of products, meaning that shoppers should see value in whatever they buy. Bolland said the cuts were across the “whole of the basket”, rather than just slow-selling lines, because shoppers needed to feel the value in their weekly shop.
But Bolland also pointed out that shoppers are not down-trading in Morrisons stores and, while there is strong growth in value lines, the grocer’s healthy and organic food lines are registering double-digit growth.
Morrisons’ nearby competitor Asda has also witnessed this trend. In our exclusive interview with Asda chief executive Andy Bond in today’s issue, he reveals that, while its opening price-point product has shown growth, its premium and higher price-point ranges are doing best.
Morrisons and Asda have both been showing good growth for some time, but it is clear that they are getting new shoppers because of the economic climate. Their loyal shoppers may be buying more of the value ranges than usual, because money remains tight, while their new shoppers could be trading down from the likes of Tesco or Sainsbury’s and snapping up the premium ranges, which, in their basket, will be seen as value products.
This trend is likely to continue while the market is tough and food inflation remains a key concern. For Morrisons and Asda, this is a huge opportunity. After all, if shoppers like what they get from their new choice of supermarket – even if the climate improves – they may keep going back.
But for Tesco and Sainsbury’s, it is a major concern. Both grocers were lagging behind Asda and Morrisons in last week’s TNS figures. While the northern grocers increased their market share, the southerners’ share was eroded.
This year, price will be the dominating factor for supermarkets and Morrisons’ 2,000 price cuts is only the beginning. Shoppers will be savvy and they will be tempted by promotions such as buy-one-get-one-free, but they will only keep going back if they see real value in a full basket of shopping.