Seen In-store: Tesco price matches discounters.
Tesco are obviously continuing to feel the heat from the discounters, and they obviously consider them an ‘opponent’ worth fighting (i.e. one they can beat).
But Tesco’s losses to discounters aren’t necessarily disproportionate: they’re painful, yes – but they’re not suffering any more from the rise of Aldi & Lidl than, say, Asda, Sainsbury’s, Waitrose, etc.
From the data we’ve seen on new, non-, and lapsed shoppers – and of retailer switching/ supplementing behaviour – the shift away from the big 4 is largely part of a ‘fair share’ equalising of the market: an adjustment that would happen after the addition of any competitive new entrant…
While these fair-share losses to discounters will likely slow eventually, they’ve exposed otherwise unrealised shopper needs and expectations. So, Tesco should certainly be aiming to match the value that shoppers find at the like of Aldi & Lidl – but that value is more multidimensional than just the low prices they offer – and it involves balancing a number of different ‘currencies’ shoppers give and get when shopping:
Functional
(high quality items, appropriate assortment, reliable merchandising);
Experiential
(ease of shop, curiosity-satisfying);
Social
(“award winning” associations, savviness status);
Sacrificial
(total trolley price, store proximity, speed of shop).
The last thing Tesco should do is start a trivial and deleterious competition to eat into margins. Instead, they might focus on dialling up distinct, relevant, and memorable advantages of their own that tick-off these needs and expectations of shoppers shopping at shops.
Written by James Gudgeon, Strategic Planner.
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