When the major supermarket chains were growing at a massive pace during the 1990s, we liked them.They used their might to cut the profit margins of their large corporate suppliers, and passed the savings onto us. They offered all we needed from our weekly shop under one roof.
But the shine eventually wore off the new-build stores. Some became tatty and dirty. Standards slipped. Shelves were more likely to be bare. And the stores increasingly came to look like one another, as the majors imitated the best features of their rivals. Consumers felt that their freedom of choice was lessening.
After the hype faded from what had originally seemed innovative and convenient (clothes and TVs at the supermarket!), we came to see the superstores for what they were: down-market shopping malls.
Then the stories began to leak out: Tesco and ASDA were putting the squeeze on poor farmers, who were struggling to make ends meet. Dairy farmers were forced to sell milk at less than it cost to produce.
We saw the devastating impact the out of town supermarkets had on our high streets, and small local independent retailers. Whilst money spent at locally owned shops had a habit of staying within the local economy, money spent at the Big Four went to Cheshunt, London, Leeds and Bradford, to be distributed amongst shareholders. Supermarkets were no longer the good guys, they were the bad guys.
The most recent data from Kantar indicates that Tesco, Sainsbury’s, ASDA and Morrisons are currently the “squeezed middle”, as Waitrose continues to outperform at the top end of the market, and LIDL and ALDI put the squeeze on at the value end of the market. Middle class customers are increasingly shopping at the discount supermarkets, as the recession causes them to ask, “Why pay more when you don’t have to?”
As plucky (and relatively new) upstarts, ALDI, LIDL and Waitrose have so far avoided the backlash against the major supermarkets. The relatively small three still only have a combined market share of 11.8%. The Big Four have a combined grocery market share of 74.9%.
The Big Four offer customers a broadly similar range of products, but the “small three” genuinely offer something different. Waitrose offers products that you otherwise wouldn’t be able to find unless you happened to live near to a large and well-stocked deli or farm shop. ALDI and LIDL offer heavy discounts on brand name products, and offer cheap own-brand imitations. All well and good, but you’d struggle to do your weekly shop there, and the same goes for Waitrose for all but the wealthiest shoppers. The “small three” are growing now, but their market is principally “top up shoppers”; people adding to their weekly shop.
I predict that after a slight decrease in market share for the Big Four, and some further increases in market share for the “small three”, the market will level off. As the economy improves, customers will revert to shopping at the Big Four.