The era of frugality is upon us and Tesco has revealed customer shopping patterns are changing. Can Tesco and its competitors face up to the challenge and is it a chance for an alternative like The Co-operative Group to shine?
While it’s very rare that you’d hear Tesco agreeing with Asda, its sentiments yesterday seemed to do just that. Tesco released some interesting data that came out of its customer research, which proved Asda boss Andy Bond’s comments at the end of last year that we are moving into an era of frugality.
It seems obvious that customers would shop differently in a recession, but Tesco’s research did throw up some interesting facts. Customers are making lists, planning meals and buying deals. And it’s not just deals at the mainstream grocers – clearly meal deals at Marks & Spencer and Waitrose are popular too.
Customers are also saying that shopping has become less enjoyable because of the constraints. It’s stressful managing a tight budget and that in turn creates an increased source of tension with children and partners. One customer told Tesco that because her partner had lost his job, her weekly food shop spend for the family had been dramatically reduced from£140 to£50.
Tesco already started to plan for this change in habits from late last year when it launched its Discounter range. It found that while customers want to buy as cheap as possible, they don’t want to fill their baskets entirely with products from its Value range. Tesco believes the Discounter range gives customers that sense of normality as they can have brands, but at a cheaper price than the usual FMCG brands found in supermarkets.
Interestingly, Tesco’s research also threw up the fact that customers still remain committed to the environment and ethical issues. If they can afford it, they still want to be green. Tesco said deals such as five energy saving light bulbs for 40p flew off the shelves.
While Tesco’s research means price-sensitive grocers will do well in the downturn, customers’ ethical stance also paves the way for the UK’s fifth grocery player to come to the fore.
The Co-operative Group is due to complete its deal with Somerfield in a few weeks and chief executive Peter Marks believes the downturn is exactly the time for its ethical stance to shine.
Next week it will launch an advertising campaign promoting some of its work in fair trade, arguing that the Co-op is now an alternative to a plc.
With Tesco’s customers saying they still want to do the right thing, the Co-op could very well be right. It is imperative that the Co-op is able to compete on price too, but if it gets on top of that, it could well give the grocers another powerful competitor to contend with.