Showing posts with label price war. Show all posts
Showing posts with label price war. Show all posts

Thursday 8 January 2015

Tesco Re-boot - Dave's work-in-progress...

Given the combination of store closures, asset disposals, capital investment cut-backs and appointment of Matt Davies as UK CEO, it is now obvious that baggage-free Dave Lewis means business.

However, these moves are being made in order to shore up the Balance Sheet and cover some of the Pension Fund deficit. Closing 43 loss-making stores and selling dunnhumby and Blinkbox will yield no more than £2.5bn.
Therefore it is best to see this morning’s announcement as part of an overall disposal programme that has to see the disposal of Tesco Bank, and their SE Asia interests in order to give Lewis sufficient elbow room to tackle the real agenda - The neutralisation of the discounters…

In fact, the announcement of up to 25% price-cuts on 380 branded products could be seen as ‘one for the multiple team’ aimed at using big-gun brands to impact Aldi and Lidl's equivalent surrogate-brands. Note that there was no attempt to make the price-cuts via Tesco private label…

It follows that the other mults will need to follow suit to avoid becoming side-dishes on the menu… 

Two issues remain:
  • What discounter categories will Tesco tackle next via what brands, in order to address the full discounter portfolio?
  • Given Dave’s generation, will this first cut be the deepest….?
Time for suppliers to run the numbers on the inevitable scenarios in order to anticipate and factor in Tesco’s obvious determination to meet their customers’ needs for “simpler, lower and more stable prices”?

Thursday 13 March 2014

Morrisons success as price-warrior depends on the battle?

Whilst Dalton Philips price-cutting promise, on top of profit losses relating to writedowns, and negative like-for-like sales, was not sufficient to avoid spooking the stockmarket, the company remains in a strong position…

Thanks to Ken Morrison’s conservative attitude to money, the company is asset-rich and the sale of £1bn from an 80% owned store portfolio will eventually calm the shareholders, and leave a robust retailer in place.

The CEO’s promise to cut prices permanently to a level that would not have to match those of the discounters, but to be just low enough that its fresh food and quality offer would look worthwhile, anticipates one definition of the price war....

However, the issue for suppliers is where the upcoming price-war is headed…

Will the big 3 take a similar stance to Morrisons on going ‘low enough’ to compete – giving Morrisons a fighting chance - or is the agenda to match or even undercut discounter prices, product for product, and arrest their growth…?

In which case, the discounters cannot afford to go lower, and the depth of major retailer pockets will only be limited by stockmarket reaction…, with Morrisons at a distinct disadvantage, currently.

From a supplier perspective, it is vital to stick with current pricing and trade investment strategies - and compliance conditions - and effectively sit this one out…

Tuesday 11 September 2012

reEpricing while you wait?

The fast-moving Internet pricing games used by airlines and hotels are now moving to online retailing via a new generation of algorithms that are re-pricing products on an hour-by-hour and sometimes minute-by-minute basis.

A goal is to maintain the lowest price-even if only by a penny-so that their products will show up at the top of the search results by shoppers doing price comparisons.  The most frequent changes are for consumer electronics, clothing, shoes, jewellery and household staples like detergent and razor blades.

Retailers find that changing prices more frequently can boost sales dramatically, but requires a lot of attention. First they set the software to beat their competitors by a certain percentage. Then they set a floor price below which they will not go.

For consumers, the result is more volatile pricing. Once the low-price vendor for a particular item sells out, rivals selling the same product can immediately lift their prices without fear of being undercut.

In effect, retailer Epricing is making the world's most modern market into the most old-fashioned, taking us all back to the laws of supply and demand, with lessons in pricing that can optimise our more traditional routes to market.....24/7.

Thursday 9 August 2012

Tesco’s ‘arm’s length’ artisan coffee shop business, an approach to 'over-branding?'

                                                                           pic: University of Cambridge
Yesterday’s announcement of Tesco’s entry into the artisan coffee shop business via a non-controlling stake in Taylor Street represents a move to ‘….help build brands where we believe we can add value; much in the same way we did with [garden centre chain] Dobbies, [video and music-streaming sites] blinkbox, and We7’.
It could also an acknowledgement that the Tesco name is ‘over-branded’, at least in the UK.

An incremental option for Tesco? 
This means that Tesco could now begin to capitalise on its ‘back-of-shop’ and supply chain expertise/muscle, leaving all ‘front-of-shop’ activities to their business partners….. "we are investing in the entrepreneurial founders of a new venture. The Tolley family will decide the business strategy….Taylor Street is a successful artisan coffee shop business with a loyal and thriving customer base…"

Why the hands-off approach?
Tesco need play no overt role in the day-to-day business, i.e. front-of-house, but the likely addition of buying muscle, distribution, instore d├ęcor/equipment, purchasing of roll-out sites, and potential use of spare space in ‘over-capacity’ stores could provide all the help a small company needs, and can receive from a ‘sleeping’ partner that also has one eye open…
In practice, everything the consumer sees will be Taylor Street/ Harris and Hoole, whilst what the consumer cannot see, will be supplied by Tesco..
A neat way for Tesco to generate incremental profits, without adding to ‘Tesco’ presence in the UK.

The supplier’s options?
From a supplier point of view, the customer gets bigger…
However, this can represent an opportunity for those who really think through and are willing to integrate with Tesco’s options for a company with a 30% share of the grocery sector, and an engine that is capable of far more…

Monday 5 December 2011

Today’s Special Offers: Suspicion & Brand Equity Dilution!

Britain's biggest supermarkets spend a lot of advertising money telling the consumer they offer great value. But an investigation by Panorama (tonight BBC1, 2030) will reveal that not all "bargains" are quite what they seem. (detailed examples)
The deals at Asda, Tesco, Morrisons and Sainsbury's might seem to be everywhere, but strip away the jargon and catchy promises of "huge savings" and "special offers" and you are just as likely to find tactics that experts say range from a bit cheeky to others that could lead to prosecutions for breach of consumer protection regulations.
However, the law is a way of dividing up what remains of an asset, after the event, rather than a means of preserving its value. Legislation is not intended as a means of preserving brand equity. In fact, by the time the authorities resort to legislation, the ‘crime’ will have already have caused irreparable damage to a consumer’s perception of a brand, be it product or store….making the savvy consumer more cynical as they attempt to second-guess the brand-owner, and possibly causing the cautious shopper to suspend the purchase.
It could be said that everyone should make their own minds up on value, but surely the whole idea of branding was originally about giving value-assurance ‘every time you open the box’ i.e a tube rattling around in carton is already speaking for itself and eroding brand equity…
In other words, by the time the authorities act the damage to brand equity has already been done…
Leaving the legalities to the lawyers, it is perhaps more productive to explore impact on brand equity
Impact on brand equity
Savvy consumers enjoy unprecedented access to price comparison facilities and are buying a combination of Product, Price, Presentation and Place when they purchase a brand. This gives the consumer a basis for comparing brands in a category, and diluting price credibility thereby undermines the shoppers perception of value of this ‘package’ possibly making the competitor’s package more appealing in terms of value, resulting in a compromise on fit with consumer need. In other words, another opportunity handed over to the opposition...
Impact on retailer equity
Whilst retailers have already absorbed insights from ‘brand experts’ and run the store like a supplier’s brand, with some success, it might be to their benefit to reflect on the fact that a shop is more like a house-brand than a single product brand. In other words, shoppers are buying the ‘House of Tesco/Asda/JS/Morrisons’ in terms of store brand equity and not individual brands.
Suppliers of house brands are doubly careful in the marketing of their products when offered under the Company name i.e. a bad product failure can negatively impact the entire product portfolio. So too retailers should not underestimate the difficulty in restoring shopper-trust following ‘misleading’ promotions associated with the entire store...
Whilst retailers may feel that individual brands will absorb the negative impact of ‘misleading’ offers that are technically within the spirit of the law, it may be worth bearing in mind that shopper-perception may be more important than reality, especially when shoppers are unwilling or unable to analyse the offer and make a like-with-like comparison of value. It can be easier for the shopper to simply allow one extreme example, or TV programme (!), to represent the entire shop, and switch allegiance to an alternative, more trustworthy retailer…

Either way a loss to brand and shop, and ultimately a waste of brand investment.
Both brand team and NAMs need to monitor execution of pricing and promotional mechanics instore. Whilst the short-term sales uplift may boost short term performance in these unprecedented times, brands owe it to the consumer and trade partner to think like a shopper and help them make like-with-like comparisons that benefit brand equity, long term…