Monday, 13 October 2014

Supermarket Price Promises – Mostly Smoke and Mirrors

Shoppers’ continued search for value, and the onslaught of discount grocers has led to the Big 4 supermarkets are tying themselves in knots trying to assure their shoppers that they offer the same prices as their competitors.

All claim that the shopper can be confident that their purchases will be no more expensive than if they had bought elsewhere, but close examination suggests that the initiatives being run by the supermarkets are mostly smoke and mirrors designed to give the illusion of value but in reality offering little of substance.

No store hands back hard cash if they are found to be more expensive. Instead Tesco, Sainsbury and Asda hand over vouchers and Morrisons has a complicated scheme where a card has to be obtained, points are added to the card when purchase at another store would have been cheaper, and the points are eventually traded in for a voucher. Voucher schemes benefit the supermarket because many will have been lost or forgotten about before they expire.
There are other wheezes designed to limit supermarket exposure. Sainsbury only compares with Asda, dropping the comparison with Tesco in a recent change designed to save money. Asda makes the shopper do the comparison work. It guarantees to be 10% cheaper than the other three major supermarkets but the shopper has to go online, enter till receipt details to find if their shop could have been cheaper elsewhere, and then claim their voucher.
There are a myriad of exclusions and exceptions to the various price promises. To be fair, Tesco’s Price Match covers all shops big and small, and fresh and own label products as well as branded. Morrisons compares with Lidl and Aldi as well as the majors across branded and own label. But Sainsbury does not offer its Brand Match in convenience stores, neither does Morrisons, and Sainsbury only compares branded prices.  All the supermarkets stipulate a minimum spend. No store gives out a voucher worth more than £10. Many everyday items are excluded such as baby formula.
There will be shoppers who have the time to go into the detail and work out how to make these pricing initiatives work in their favour. Many though will quickly conclude that the only thing that counts when shopping is the size of the bill week in and week out.
Which takes us back to Lidl and Aldi.
Despite the flurry of reduced prices and price promises among the “Big 4” both discount stores continue to flourish. Add to this Aldi’s recent commitment to keep the price differential between themselves and conventional supermarkets at a minimum of 15%, and it is difficult to see how the majors can hold their position without concrete and continued price reductions across their whole range of goods. So far, they are only playing at delivering competitive prices.