Tesco Pays the Price for Ignoring its Customers

It’s been a dramatic week for  supermarket watchers.

First, Morrisons who had been the clear leaders in the grocery war of late announced that their sales over Xmas period had grown by a tiny 0.7%. Dalton Phillips their Canadian chief executive said it was because cash strapped Brits were unwilling to splash out over the festive season.

Somewhat contrary to this picture of austerity consciousness, Waitrose announced sales growth of +3.8%. Now as anyone who has ventured through the doors of a Waitrose will know their food is not cheap, even following much publicised activities such as a price match with Tesco on 1000 lines.  Next came Marks and Spencer, also not a cheap place to shop, with sales growth of 3%. According to ex Morrisons chief executive Marc Bolland this was due to the introduction of 600 new products, and keen pricing on some lines. Indeed M&S customers seem to be gregarious types, powering sales of party packs of food to by 8% and fresh turkey by 25%.

Then we heard from Sainsbury with sales up 2.1%. According to their head man Justin King, their premium Taste the Difference range grew by 10%, but he did concede that at the other end of the scale their cheaper value range grew by 7%.

We have not heard from ASDA yet but they are reported by market researchers Nielsen to have had a good Christmas sales performance also.

And what can we say about Tesco whose Christmas trading performance was nothing short of dire, with sales down 2.3%. It is not just a short term issue either.  According to their chief executive Philip Clarke, Tesco’s “entire shopping experience” is not as good as it should be and he indicated that Tesco has failed for years to deliver on product availability, service and food quality.

And thereby hangs the clue as to what makes the difference between winners and losers. Yes, indeed British consumers are feeling the pinch, scrutinising all costs, budgeting, cutting down on waste. But, they are prepared to spend their money with grocers who offer the combination of price, quality, and specialness which makes them feel as if their money has been well spent.

The “upmarket” grocers between them have about 25% of the market and despite cash strapped times were rewarded because they offered that critical concept of value for money that consumers seek, especially when money is tight.

Those who keep close to their customers and listen to them generally do well. Tesco has not been listening, and has not done so for years, resulting in lost customers and falling market share.

Turning a deaf ear to customer needs leads to problems.