Supermarkets must take heed of crackdown on dodgy price tactics or face losing more customers to discounters
Supermarkets were warned today that a degree of action will be taken on price tactics described by the consumer watchdog Which? as “dodgy” and “misleading”, and they should take heed, according to former Asda marketer Phil Dorrell, or face losing yet more market share to discounters like Aldi and Lidl.
The Competition and Markets Authority (CMA) ruled after a three-month investigation that there is evidence of supermarkets – including Tesco, Waitrose and Ocado – misleading customers with confusing pricing promotions.
The main issues arose with supermarkets running 'was/now' pricing promotions, where the discount price is advertised for longer than the higher price.
Supermarkets have long practiced the tactic in a bid to entice shoppers through their doors, with suppliers willing to submit to lower margins to get products in the cupboards of the consumers rather than those of their competitors.
However, there has been a proliferation in these types of offers in recent months, as Tesco, Asda, Morrisons, and Sainsbury’s face increasing pressure as they lose market share to discounters.
The only way to compete for attention against the continual low prices of Aldi and Lidl is to discount branded goods. Indeed, combined the ‘Big Four’ have invested over a billion into lowering prices.
Today, Which? and the CMA estimate that 40 per cent of grocery spending is on items on promotion.
“Are the supermarkets right to continue this drive for promotional complexity, well in their eyes yes, it works, it drives volume and price perception for both the supplier and the retailer,” explained Dorrell, managing partner at consultancy Retail Remedy and former marketer at Asda.
Dorrell said it’s likely the warning from the CMA will gather some attention, but it will be short lived, and the supermarkets concerned will temporarily “bow heads” but, by and large, things will not change.
“They are too powerful, the suppliers are too afraid to speak out in evidence against them and the whole matter will be forgotten in three months,” he predicted.
The British Retail Consortium – the association for the retail industry – also dismissed Which?’s suggestion that misleading offers was systemic across the industry.
Tom Ironside, director of business and regulation at the trade body said: ‘It is very clear that the allegations contained in the super complaint were blown out of all proportion.”
For consumers, this likely means they will continue to be bombarded with complex promotional deals. Furthermore, grocers have created a scenario where products are so frequently on promotion, that any intelligent shopper knows that they should only buy on promotion.
“If you are buying at 'full price' you are actually paying more than need be. This has caused huge disloyalty in key categories where shoppers will switch according to the promotion on. Grocers are teaching shoppers to do this,” said Rachel Wilkinson, digital director at Publicis-owned retail agency Vivid and a former buyer at Woolworths.
YouGov’s bi-annual study on brand perceptions, published yesterday (15 July), highlights this change in consumer attitude. The survey asks consumers the brands they have heard positive things about. Aldi held the topped the list – beating John Lewis, Netflix, M&S and Apple - followed by Lidl. No other supermarket makes the top 10.
Dorrell suggested that, unless supermarkets are more transparent about their pricing strategies, Aldi and Lidl will continue to benefit from confused consumers.
“If you really want to make a statement then complain, complain and then let them know you are de-camping to a supermarket that is more open about the true value of product, and presently this means the discounters.”
Stuck between a rock and hard place, supermarkets will nonetheless have to respond and consider strategies other than tried and tested promotions to woo shoppers to their tills.