Are supermarkets in trouble?

UK situation

Tesco has reported a 6.9pc decline in annual profits as Britain’s biggest retailer struggles to reverse a fall in sales. The supermarket group said that underlying pre-tax profits dropped to £3.1bn in the year to the end of March with sales under pressure in the UK, eastern Europe and Asia.

“The once dominant forces of Tesco, Morrisons, Asda and Sainsbury’s are all seeing their market share fall in the UK and are losing sales to Aldi, Lidl and Waitrose,” he says. US situation

US situation

Trader Joe’s is the emblem of success in the limited assortment category: With its low prices and a tightly-edited collection of products, the store is pulling down $1,723 in sales per square foot,  compared to $552 per square foot at Publix or $496 at Kroger.

These supermarkets have ultra-narrow profit margins, building their success with shoppers who come back frequently and regularly fill their cart to their brim.  And so Ahlburn says their chief challenge in this climate will be to stay profitable.

I’d suggest there are other factors too. Julia M, on Twitter @AmbushPredator, posted this pic of Morrison’s security:

morrisons security

Charming.

And still on Morrisons, shares jumped 5% on the sacking of Dalton. That’s the triumph of hope over experience as there was a similar jump in February on the family buyout.

Particularly taken with this:

British retailer Morrisons says chief executive Dalton Philips to leave; sales in Christmas retail period down 3.1%

Looking at my own food shopping, there are four major reasons my local shop around the corner now has my business:

1. It’s local;
2. It now runs a card machine;
3. It’s also a paypoint for utilities bills etc.
4. It has a narrow range I can influence.

What I mean by this last one is that the place is small enough for the boss to ask certain customers from time to time what they like, what they don’t. It’s not a 100% correlation between what we want and what he gets in but it’s pretty good.

Only thing he’s not great on is fresh greens. Perhaps he’ll get some in. If he had, say some white cabbages, I’d certainly buy mine from there and for a certain amount over the odds.

If ASDA ask £1 for a white cabbage and this guy asks £1.59, that’s a huge markup comparatively but I’d pay it on selected items I’d use over a week but would not pay such a markup on, say, daily milk.

The Trader Joe story above is not unlike the pound shop and convenience store story. Narrower range, quality food [to a point – good enough for the job anyway] far lower price, surprising things from time to time.

Aldi is good that way – no frills and carrying lines they put in the centre bins which vary but bargains can be had, e.g. I picked up some mid-quality boat shoes for a ridiculously low price.

There are things I’d still pay out for, e.g. tops, jeans but there are things I wouldn’t. Sponge scourers is one I’d buy the generic brand.

You?

5 comments for “Are supermarkets in trouble?

  1. January 13, 2015 at 5:06 pm

    I have been a detester of big supermarkets for many years, it was about the time that in one year we lost 3 of 4 butchers 2 of 3 greengrocers and 2 of 3 bakers plus our local milk delivery services.

    This coincided with the opening of a Tesco superstore on the industrial estate near by, I HAVE NEVER and WILL NEVER shop at Tesco.

    I have always preferred to support independent shops for local fresh produce, mainly because I can trace it right back to where it came from.

    My supermarket of choice has always been Morrisons, and I still use them about once a month for big shops to stock up on some products, like tins, dog food and their own brand Tea bags which is the only Tea these days that does not give me raging indigestion. Other wise I have always brought my meat, fish, fruit and veg and bread from local independent shops.

    However it’s a bus ride away from where I now live, so I use my local shops, as you quite rightly point out it has everything I need and a post office.

    I was gutted recently when we lost our only local Bakery so now I am reduced to purchasing plastic bread but I still won’t ever step over Tesco threshold.

    As neither myself nor Him indoors drive Aldi and Lidl are both too far away from us to be a viable option and there is no bus, I still prefer my local shops and will continue to do so.

    I dislike the pressurised sales tactics of ALL supermarkets intensely and I still maintain you don’t get something for nothing in this life, special offers are usually items that have been over priced for month prior to reduced price selling, and if I don’t need it and wouldn’t usually buy it it’s not a bargain.

    As for 3 for 2 I don’t want need nor have room for 3 jumbo boxes of corn flakes most of which will go off before iv’e opened box number 2 so it’s not a special offer. People will fall for any old nonsense if they think they can save a penny. Not me I am a supermarkets worst nightmare a shopper who hates shopping and only buy what I need.

    I’d love to see an end to supermarkets and out of town superstores and a return to small independent local shopping culture. I like individual shops not this big business conglomerate pish.

    • January 18, 2015 at 6:41 am

      I love individual shops too, for specialist items. But the price war the big five are involved in at the moment is putting money back in my pocket!

  2. Flyinthesky
    January 13, 2015 at 7:31 pm

    It’s all down to business imperative. I have witnessed the phenomenon in the small village I used to live in. When I fist moved there they had six independent conveinience stores. The Co-op moved in with a mini supermarket and outpriced all of the stores. Within three years they had all gone. Fair competition you may say, the reality is now they have the monopoly on the village their prices are now a least 10% greater than the independants would have been.
    B&Q have also used this plan. Our local hardware store sells most of the things that B&Q sells and much cheaper. You can go into it and buy 1 screw but for how much longer. B&Q’s offering is packets of ten with the ubiquitous bar code. Piece for piece often 5 times the price.
    Campaigners often decry the minimum wage, if you increased it to £10 an hour how long would it be before the corporates relieved you of any advantage. I suggest in very short order.
    In the village we had a butcher, now long gone. The manager of the co-op had the effrontery to challenge the butcher, across the road, for selling veg, potatoes, eggs, onions and mushrooms but didn’t see the problem of the co-op selling meat!

  3. Ted Treen
    January 15, 2015 at 12:29 pm

    All of the foregoing, plus I’ve convinced Madam to come to ALDI – she’s now a convert.

Comments are closed.