“Grocery wars” is shaping up to be one of the longest-running soap operas in the world of retail. The latest instalment has Aldi overtaking Waitrose as the sixth-largest grocer. Surely the narrative is obvious? It is that discount retailers are about to steal a march on the big four UK supermarkets.
However, we need to look more closely. The headline figures on grocery share are based on sales, but this doesn’t mean that Waitrose has lost customers to Aldi. We have to bear in mind the context – that Aldi is still expanding its UK store base and may soon reach saturation point. Indeed, the Kantar Worldpanel’s March figures on grocery market share showed that Aldi had recorded its slowest rate of growth in several years. To state the obvious, Aldi is also a foreign company and there are many new countries and markets for it to explore when growth begins to slow in the UK. While Aldi has six stores in Sheffield, it has 36 stores in Dresden. Also, neither Aldi or Lidl are listed, which means they are not faced with the same level of scrutiny that comes with being a listed company, as the UK-based grocers are.
Following from Tesco’s “kitchen sink” impairment announcement, Asda has now reported its worst sales decline in more than five years. Chief executive Andy Clarke has blamed this on the supermarket price war. Certainly, the price-cutting race has led to deflation in the sector, and this is something that can’t be sustained. A race to the bottom will find the bottom.
What will start to be more predominant is the race for convenient space. This will be the new battleground over the next year, along with increased competition over digital innovation in terms of customer service. Better integration between the physical and virtual retail worlds, price, convenience, online capability, provenance and service will determine the eventual supermarket war victors. There is no reason that this can’t be one of the big four.
Tim Vallance is head of UK retail and leisure, JLL
