What we can learn from the 2014 supermarket price war

Brand match

I’ll try not to spend it all at once.

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*.

Read the LBC article.

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?

One Response to What we can learn from the 2014 supermarket price war

  1. Jackie November 12, 2014 at 1:40 pm #

    There’s also an interesting article about this subject on Business Insider today:

    http://uk.businessinsider.com/sainsburys-is-cutting-prices-of-essentials-as-the-supermarket-war-rages-on-2014-11

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