tesco trolleys

Combating Grocery Discounters

So the great and the good of the big 4 have all had a little look at what they can do about the grocery discounters and come up with surprisingly different solutions to the same problem.

The discounters you see do not merely offer cheap goods at cheap prices, nor is it all own label. They have adapted their offer, appealing to a broader spectrum of customers and have marketed that offer well, better in truth than the big 4. The dismissive concern seen 5 years ago has become one of more considered response, yet it has to be said, nobody seems to have got it quite right just yet. Let’s work our way up the market share league table and see what has happened.


Having improved the retail operation significantly over the last two years, Potts has invested in price to combat the threat in those areas where Aldi and Lidl were advertising strongly, namely fruit and veg and basic meal items. Having said that, the marketing has been a little muted and a visit yesterday suggested that the in-store manifestation of this was limited. You do not come away with the sense that there is a battle in play. The strategy seems to be get the operation sorted, emphasise the range and not to be out-done on basic prices, but do not compete across the board with the discounters.


Asda had the most to lose, and boy have they lost it. The first thing they did was react on price, numerous roll-backs across the range in all areas and shout loudly about it. They have some of the biggest stores and largest ranges in UK mainstream grocery and yet seem to be caught in the price trap, a battle they will lose. They are not set up to compete with discounters and if they try, the inevitable dip in quality will be off-putting. That said, standards in their stores have improved in the last 4 weeks, if strategically they seem limited. Like for like increases are inevitable based on the slump recent years have delivered, sorting availability would give them that.


The most radical of all the big four in their change strategies, but not all well worked through. The Netto relationship was a little pathetic and although they may have learned a lot, they did not improve their price perception from it at the time or since. Buying Argos however is another bold move and although is causing some teething troubles, is a good idea. Diversification seems strategically the right thing to do against the discounters.


Strategically sound at first, in that they took the ball away from Asda three years ago in the price comparison marketing sham. Then they upset the apple-cart by introducing farm branded lines that were at discounter prices and generated a massive volume. They have taken a lot of cost out of the operation by reducing the night filling element but frankly our visits have merely highlighted low levels of fill and gaps. This must be costing them sales no matter what the PR stats on their availability is suggesting. The Booker deal will be a great piece of business for them longer term and suggests they realise that diversification is the key: be more local, be more ever-present in product and / or stores, seems sensible. Then the other defence to discounters may be about to be announced, the opening of their own discount chain, which I would think will be a very difficult option for them to make money out of short term. So a curate’s egg, good in parts.

Whatever happens in the next 3 years, the discounters will occupy a larger part of the UK grocery landscape, they are here to stay and having reduced the operating margin of every grocer, their impact may yet be even more dynamic in years to come.