By Bryan Roberts, global insight director at tcc global
Some say that variety is the spice of life. At the very least, we’d all be pretty bored without differences to enjoy in culture, music, food or anything else you would care to name. The same is true in business, especially in supermarket retail.
As tcc global’s latest UK loyalty study confirmed, consumers are bored of generic, identikit loyalty programmes. Astonishingly, only six per cent of the shoppers we interviewed said they would stop shopping at a store if it ceased to offer a loyalty card.
Even more worrying for the “big four” retailers is the fact Aldi and Lidl now have the highest net promoter scores in the UK: a product not just of low prices either – shoppers also value their offerings in produce and general merchandise. With a significant headroom in terms of adding new space, Aldi and Lidl will continue to put their supermarket competitors in an increasingly difficult position. And all this is before we even begin to consider the additional threat posed to the major incumbents from the likes of Amazon and B&M etc.
So how should supermarkets respond? One may be tempted to adopt an “if you can’t beat ‘em, join ‘em” approach. That certainly appears to be a factor in Tesco’s decision to launch its own discounter concept, with a first look at planning and licencing documents suggesting that Tesco will be shortly introducing a concept directly inspired by its German competitors.
Tesco may well have the clout to succeed, but as James Moore noted in The Independent, it will require a wholehearted commitment to scaling up an unfamiliar business model that supermarkets before them have failed to flourish with.
Find your USP
The real key to success in the current retail environment is not to ape competitors, but to differentiate. That relies on a retailer identifying and investing in the attributes that can set it apart from competitors to win with customers regardless of price wars or technological trends.
Too often, retailers focus on the purely functional in their endeavours to better compete, often resulting in rather hollow gestures on pricing. As they seek to protect margins we also see cuts in manpower and instore resources that can negatively impact on service, availability and experience. If supermarkets are levying a premium to shop with them – shouldn’t the experience live up to it?
In the UK, retailers should focus on quality when they can’t compete on price. This was long the domain of upmarket chains such as M&S and Waitrose, but in recent years their discounter rivals have managed to close the quality gap somewhat. A renewed focus on improving their products to become a destination for certain foods and items would do them well.
We are well into the age of discounter ascendancy, and loyalty as we have known it is taking a significant dive. But a race to the bottom is not the answer. If retailers can establish a differentiated identity, and develop some distinctive specialisms, they will be able to happily co-exist alongside their low-price rivals.