Until recently, Tesco was the bellwether of the UK grocery industry, helped by a sophisticated loyalty and customer segmentation programme powered by Dunnhumby. Ironically today, in the era of the ‘Big Data revolution’, the use of data and science to drive customer loyalty was clearly not enough – or wasn’t used effectively.
What Tesco (along with the other big supermarket chains) failed to anticipate was the willingness of shoppers to sacrifice their traditional loyalty for better prices and simplicity. Is it any wonder, in this age of shrinking real wages, consumers are voting with their wallets? Have we witnessed a permanent shift away from endless choice in favour of pragmatic consumerism?
The privately owned German discount powerhouses Aldi and Lidl have stolen a march on their bigger competitors by keeping things simple. How many different types of ketchup do you really need? The Ipsos MORI Global Trends Survey revealed that 48% of Britons feel overwhelmed by the amount of choices they have as consumers. Where the discount retailers can negotiate on one variety for over 20 markets, the big four supermarkets push 20 lines in just one store. The exercise in efficiency doesn’t stop with the limited range. Pick up a pack in Lidl and you’ll see it’s covered in multiple barcodes, reducing the amount of time it takes to scan, pay and leave the store. Less choice, less money, less time, more profits.
Up until fairly recently, Aldi was focused on the lower income demographics in the North of England and the Midlands. But now the German discounters are aggressively pursuing shoppers from all walks of life with media campaigns promoting price, quality and the idea of something for everyone.
Bill Clinton’s campaign strategist, James Carville, coined the phrase “It’s the economy stupid” during the 1992 US Presidential campaign. It would be easy to use the same logic for the UK grocery market today, but I believe it is overly simplistic. The current trends are driven by a combination of the economy and the convergence of a shopper’s virtual world with their physical world. Over 70% of the UK population purchased something online in the past 12 months. The internet has changed the way we think about our shopping experience – it is now easier than ever to price compare at home or on the move with smartphones. Consciously and unconsciously we all ask ourselves, why would I pay more?
The world of grocery retail is still at the early stages of a major transformation. The continued growth of the online supermarkets, click and collect at pick-up points such as Doddle, or even your Tube station, convenient delivery options and more competitive pricing suggest that, in the end, the consumer will be the real winner. But which retailers will end up on top is still a long way from being decided.