Just in case you missed this mornings announcement, Tesco’s profits are down for the second year running, this year by 6%. Contrary to this trend, Waitrose and Lidl have had an increase in profits. In general the “big four” have all lost market share in the first quarter of 2014.
So, the premium supermarket is doing well, the discounter is doing really well and the middle ground is struggling.
Know your product and know your customer. The middle ground is a hard place to be. Are you selling it cheap with a no frills service, or are you charging a premium and justifying it with your service? If you are trying to sell cheap and also promoting that you offer a great service, what market are you really in?
And the response from Tesco’s CEO, that it’s “impossible” to win against stores like Lidl and Aldi but that they are trying to get close to them on price combined with the “most compelling” offer for their customers. Huh? That looks like being stuck somewhere in the middle ground to me.
I have always been critical of the big four. Remember the Morrison’s advert from a few seasons ago? Celebrities strolling in to a pseudo market street, brushing the snow of their fur collars to the tune of Let it Shine and getting a cheeky wink from the “fishmonger” who is showing his wares like he had been out and made the catch himself that very morning (great service) but at the same time they were promoting cheap prices. This puts them in the middle ground. Meanwhile the discounters are saying, “Look at us, the actual product is as good but we do it cheaply” without even talking about their position on service.
There are clear lessons to be learned including that you might want to avoid the middle ground…but do you know if you are in it?