Supermarkets: An overview

Most retailers survived a steady, but fragile Christmas on a mixture of good products, integrated communication and appropriate value propositions. But it’s been a bleak start to 2008. This continued within the grocery sector, with Asda, Tesco, Sainsbury’s and Morrisons sniping at each other’s ‘value’ credentials, sometimes using comparison websites to validate their claims.

This value posturing has to be considered against the consumer context. The situation we face is one of low consumer confidence, increasing fuel costs, increasing credit costs, decreasing home equities and rising holiday costs due to the falling value of the pound.

These factors make it interesting to watch many re-establishing their value instincts. Not long ago, most retailers created a very separate image and value platform. Hence Finest from Tesco, The Best at Morrisons, Sainsbury’s Taste the Difference and Extra Special at Asda. Now the supermarkets are heavily investing in and promoting their value brands.

Value products are taking up more space in the shopping trolley these days. Many consumers are still choosing premium ‘treat’ products, but are increasing the value purchases with non-emotional lines (such as baked beans and fish fingers for the children). This is called ‘portfolio’ shopping and is increasingly being seen in the fashion sector. How many times have you heard ‘jeans from Next, top from Harvey Nicks’? Customers are more sophisticated and marketing-aware than most retailers realise.

Fashion retailers are now copying supermarkets, many launching comparable value ranges. These are aimed as direct competitors to George at Asda and Tesco’s Cherokee clothing ranges. Fashion retailers have to separate their value offering clearly from the high-ticket image lines, otherwise they risk cannibalisation of sales and brand dilution. There have to be two distinct platforms that can be used tactically. Once lost, re-establishing brand values can take ages and cost millions, as Marks & Spencer and Sainsbury’s know only too well.

While these economic times are trying for the consumer, they are equally so for the retailer. Every buying and marketing department is working on reduced or static budgets, and those budgets have to stretch further than ever before. The cake is not getting any bigger, but there are more and more slices – website, above-the-line advertising for value products, sales promotion activity – meaning there is less spent on photography, image work and design.

How many retailers (and designers) go into their stores and watch what, how and why customers buy? What creates that purchasing decision at the point of sale? Is it design that sells, informs, creates an emotional link with the customer and the brand, or is it price? And only one retailer can be the cheapest.

In all this promotion and value ‘noise’, there are still some retailers prepared to hold to their brand. Waitrose maintains an almost disinterested approach, but communicates consistently through design and ‘calmness’, enticing its customers with great products, beautifully presented. And while Tesco has all its value guns blazing both in point-of-sale and above-the-line, it still manages to cut through the noise with a dash of occasional humour, such as with its Chilli Tortilla chips. As the late and much-lamented graphic designer Alan Fletcher amply illustrated, an injection of appropriate humour and wit can cut through many perceptions and restrictions. Tesco’s orchestration of communication messages and channel shows a retailer of real value experience.

I think it is going to be a tough six months for retail and the winners will be the ones that can establish a value platform based upon their brand credentials, not just ‘money off’ – as we have seen over and over again, customers are much more sophisticated than that.

Paul King is retail director at Vivid Brand