These are tough times for supermarkets. After years of rampant growth fuelled by the space race to build bigger and more out of town stores, prospects are faltering.
Despite price cuts, the introduction of trendy coffee bars and more non-food items, gloom remains. Accounting irregularities at Tesco and rumours of dividend cuts at Sainsbury’s and Morrisons persist and supermarket chiefs continue to scan the horizon for a saving strategy.
None more so than Morrisons. The big four supermarket reported a big pre-tax loss of £176m in 2014 compared with £879m profits last year. Its market share is down to 10.9 per cent, from 11.6 per cent last year, 800,000 fewer customers are passing through its doors each week, and its share price is down by 26 per cent on last year.
In fairness the total grocery industry grew by only 1.7 per cent year on year, the lowest for 10 years and Tesco is down one million customer visits a week.
However Aldi and Lidl are racing ahead with growth of 35 per cent and 25 per cent respectively, and Aldi has just swapped places with upmarket Waitrose to become the UK’s sixth largest supermarket. Like moving tectonic plates, they are shaking and re-shaping grocery retailing through offering limited choice at lower prices.
Not surprisingly there is discontent amongst Morrisons’ shareholders. Chief executive Dalton Philips’ strategy is to grow convenience stores, offer online shopping, upgrade the aged IT infrastructure and commit £1bn to cutting prices. Ken Morrison didn’t mince his words about the strategy, deriding it as “bullshit”.
With former Tesco director Andrew Higginson replacing Sir Ian Gibson as chairman, it’s time for a rethink. An extension of opening hours was recently trumpeted, but it is small beer. Strategically Morrisons needs a clear, well-articulated, long-term brand promise. It used to relate to offering more (‘More reasons to shop at Morrisons’), then it moved to freshness and now it’s moving into low price – a crowded space. Aldi and Lidl are strong here and now the other big three are piling in with their own cuts.
In a landscape of sameness, winning brands don’t stand out unless there is a discernible point of difference that is consumer-relevant, welcome and sustainable. Waitrose has taken the high ground with its quality positioning, adhering calmly to it. Aldi and Lidl have earned respect with their low price positions over many years. There are no prizes for being a brand chameleon, changing to merge into environments created by others.
Aldi and Lidl have changed the rules of engagement as well as consumers’ attitudes to low prices. Why fight using rules they introduced? Rather than a low price proposition, Morrisons needs a value proposition. Instead of incurring consumer wrath by projecting bread on to the Angel of the North, why not start to address what value means to consumers and then see how to develop and own a value proposition?
Everybody wants low prices but shoppers recognise that it’s the trade-off between benefits and sacrifices that makes it fun to boast about having good value. It will take some time to find a big idea relating to value. But if Skoda can go from being a joke competing on price to a respected gem in the market, it’s not rocket science.
However it does need some marketers to figure out a differentiated value proposition. Having just ditched its latest attempt at defining the offer – the three-month old ‘I’m Cheaper’ slogan – Morrisons is doing a good impression of a headless chicken (currently £3.82 in-store). Dashing from one message to the next will only confuse consumers further about what the brand really stands for.
Until Morrisons' marketing team has worked that out, the comms guys might as well wait at the door.
Professor Leslie de Chernatony is a board director at LIFE Agency