Mid-range supermarkets are struggling. Today, Sainsbury’s reported their worst half-year performance in over 10 years.
So what are they doing about it? They’ve announced a £150m investment in price cuts*.
You probably know how the UK supermarket brands are positioned:
- M&S and Waitrose (top end)
- Asda, Morrisons, Sainsbury’s and Tesco (big four)
- Aldi and Lidl (discounters)
Cash-strapped shoppers are rushing to the discount stores. The companies are performing well, and the middle brands are in a race to join them.
As a consumer, you might have noticed that:
- Tesco issues a £5 voucher to use when you next spend £40
- Sainsbury’s used to price match the other ‘big three’ but now only Asda (see picture)
- Morrison’s card matches Aldi and Lidl
- Asda guarantees to pay the difference if they are not 10% cheaper (online claim system)
But a price war might not be the answer.
If you are trying to make a profit in your own business so you can pay your bills, trying to undercut your competitors is not a wise move. No-one wins. Some go out of business altogether (remember Sir Freddie Laker’s airline?) and prices return to their original level.
Top tip: Instead of racing to the bottom, reach for the top. Provide better service, higher quality, more perceived value, and classier packaging. Then you can charge more – and keep putting food on the table.
* Investment in cuts – does that sound weird to you?