The last few months have seen a flurry of bad news stories about the ‘plight’ of the major UK supermarkets. Tesco, in particular, has had a torrid time and Sainsbury’s is the latest to reveal a significant dip in profits.
Across the board, profits are down (although it’s worth remembering these businesses still generate massive revenues). Perhaps even more revealing is that Sainsbury’s has forecast that profits will continue to decline for the next few years (and so, by implication, will the profits of the other three supermarket giants).
But why have things changed? Much has been made of the rise of the ‘discounters’ – principally Aldi and Lidl – and the impact they have had on the overall share of grocery spend. Both retailers have a no-frills selling philosophy and offer rock bottom prices. Both are also located on high streets where more of us want to shop more locally and more often. However, it is important not to exaggerate the impact of the discounters. Yes, they do offer low prices, different choices and more convenient locations, but Tesco and Sainsbury’s also have a significant local presence. So what else is going on?
To a large degree, supermarkets have been architects of their own challenges. Without doubt, the ‘turn to price’ that has emerged and intensified over the last 15 years or so has created a massive cultural shift. Supermarkets may insist that they were simply reflecting customer needs, but the reality is very different; they have been key agents of cultural engineering.
The big four supermarkets have created a breathtakingly pervasive ‘culture of thrift’. Price has become a defining logic, a mantra, a reason for being, the cornerstone of both brand propositions and, what we call at Truth, ‘the moral economies of home’. From a cultural perspective, the concern with price is a moral issue and not simply a matter of finances. Being price savvy helps define the shopper and provider as ‘fit for purpose’.
The problem is that while the major supermarkets have been cultural engineers of note, this engineering has focused almost exclusively on price. So, unsurprisingly, the current customer is one-dimensional, driven by price messages and lacking loyalty. They’re following the money (to be saved) rather than the retailer’s brand and, ultimately, they’re bored to death with their experiences in store (many find Aldi and Lidl ‘interesting’ simply because these retailers are different to the big four supermarkets).
Under these circumstances, it is no surprise whatsoever that footfall dips, spend declines and profitability is eroded. The response to these emergent challenges has been to shout louder - about lower prices. In reality, the intensification of story-telling around price will not build a brighter future; it will simply further engineer a customer culture that bites the hand of its creator. The real challenge is to engineer new customer cultures and supermarkets can be very good cultural engineers when they put their minds, and their resources, to it.