Read our new manifesto

Explore our new sections and topics

Are we witnessing the end of the supermarket as we know it?

Today’s marketers live in a craven state of panic as they try to seize on or adapt to the latest marketing trend, buzz phrase, or piece of essential new technology (Oculus Rift anybody?) With everybody chasing their tails, worried about missing the latest microtrend, Professor Leslie de Chernatony helps businesses separate brand magic from hype.

With supermarkets poised to indulge in another round of price wars a report from Goldman Sachs could either pause the knife or lead them to drive it even deeper.

The analysts have come to the conclusion that tinkering around the edges is not really an option for the big four and that their only option to return to growth is to start closing stores – it suggests one in five should just about do it.

Prices will always be important to shoppers and it’ll always be a battleground, but the bigger question remains what can or should supermarkets offer beyond price to engage with shoppers?

At either end of the scale, Waitrose and Aldi/Lidl have answered in their own ways. It’s the supermarkets squeezed in the middle that face the most fundamental issues. Tesco has attempted to play the emotional card with new touchy feely advertising from W+K, and a gentle store refresh along with family friendly restaurant formats, but the Serious Fraud Office's investigation into its accounts has further upset the apple cart. All of these are deep-rooted structural and long-term business problems.

However, the discounters will have challenges of their own. Some have only just started taking credit cards but now they’re announcing grand plans to expand and convince a bigger proportion of UK shoppers to fall at their feet – really?

As they move from occasional bargain hunting/novelty/top-up to regular main shop, shopper demands will escalate, and they’ll be forced to change their operations and supply chain to more established models. A likely scenario is that growth will slow, running costs will fall in line with their competitors, and they’ll then start to face the same challenges.

So, where are we?

Supermarket retailing is in a state of maturity. Decline could be the next logical step. It’s not inconceivable that the big four become three. Or the future could see even more radical alternatives. What if UK supermarkets, like the UK motor industry of the 70s and 80s, are heading into a period where things won’t simply get better?

We’re approaching a paradigm shift and the signs are there:

  • Supermarkets are sitting on vast land banks built up over the decade of the ‘space race’. It’s naive to think that the grocers can exit this situation quickly.
  • As .com sales grow, grocers' profitability declines. These businesses just weren’t set up for this new trading mechanism.
  • The majority of the grocers’ brands stand for little, if anything, beyond price or price based offer. Grocers have squeezed supplier brands marketing, margins and their relationships.

So, what now?

If we go back to first principles the question is broader. What do shoppers want? Simply fridges and shelves stocked with all kinds of food and drink. In which case, do they care where they get the goods from or which brands they buy? People have preferences but very rarely absolutes. Switching behavior has few costs. In this world the persuasive argument will be largely taken care of outside of the shopping environment (TV, online etc) with transaction channel and price becoming more important.

Technology, far from being traditional grocery retailing’s saviour, may plunge the knife in further. As the internet of things becomes a reality, your smart fridge or food cupboard won’t feel much loyalty towards a particular retailer. The main variables in its algorithm will concern who can supply this, at what price and when?

So what's to stop the likes of Apple, eBay or Visa becoming facilitators and providing a white label grocery offer for a goods distribution and ops based back end, as Ocado has done for Morrisons? It happens with airline tickets, insurance, and cars. There is already a grocery aggregator, mysupermarket.com disrupting the status quo. These will only get slicker.

In this scenario price wars will probably be even more important. The big four need to think the unthinkable. They need to figure out how, or if, their models can work in a new paradigm; what consumer value and reward actually means, and what their brand values really are.

It wasn’t long ago that Walmart was a massive company – then Apple came along. Discuss.

Professor Leslie de Chernatony is a board director at LIFE Agency