It would be easy to interpret this week’s news from the supermarket world as a sign that the powerhouses of UK retail are floundering.
It would be easy to interpret this week’s news from the supermarket world as a sign that the powerhouses of UK retail are floundering. The top grocers all failed to grow share in the Kantar statistics, Asda reported minimal like-for-like growth in its second quarter and it’s the hard discounters and Waitrose that are the star performers.
It’s a big change from the growth and expansion into new categories that has been the hallmark of the biggest three over recent years. But what they failed to see is that now we’re in a world of high inflation and low consumer confidence, the mindset of the consumer has changed.
It’s no coincidence that the grocers that are seeing their market shares fall are those which have the biggest stores and the most extensive non-food offers. In the age of rampant credit, consumers were more than happy to throw extra items into their trolleys in a spree reminiscent of Dale Winton’s Supermarket Sweep.
The mindset among shoppers now is ‘how little do I need to buy’, rather than ‘how much I want to buy’. Combine this with the astronomical price of petrol – despite the retailers’ effective promotions – and it’s no surprise that shoppers want to shop locally.
That’s hard to deal with when your business model has been predicated on opening more space in bigger units, so the challenge of the biggest operators is clear. But from Asda’s acceleration of small supermarket openings to Sainsbury’s brand price match pledge, this week’s events show they are trying to make up ground.
The environment will remain tough, and highly promotional, but once the holidays are over, rest assured the big four will be back all guns blazing to regain market share. The bigger question is whether they will scale down their ambitious store opening and expansion programmes to reflect the new world. They should because adding so much space is a zero-sum game where no one benefits. But they almost certainly won’t.
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