UK: EDITORIAL - SUPERSTORE BLUES.

UK: EDITORIAL - SUPERSTORE BLUES. - Managing change is concentrating the minds of those who labour in the industrial vineyards, and it is earning a lot of money for the gurus who think they know how to do it. No one doubts that change there has been and

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Last Updated: 31 Aug 2010

Managing change is concentrating the minds of those who labour in the industrial vineyards, and it is earning a lot of money for the gurus who think they know how to do it. No one doubts that change there has been and that more there will be. The word itself still, perhaps, has more of the ominous than the challenging about it, accompanied as it tends to be by fewer jobs.

For the supermarket giants - Sainsbury, Tesco and Argyll - it has had a heartening ring. Their consumerist temples absorb an annual tribute of nearly £23 billion of the nation's grocery bill; change has meant sharpening their management skills, increasing their margins and developing apace. In a period of recession they seemed to be the untouchables, marching on unbowed. It seemed that nothing could mar their joy - but no longer.

Last month all three marched into the High Court having found, uncharacteristically, a common purpose: to block the opening by the US giant, Costco, of Britain's first warehouse club. They marched out again having lost the battle in what was their first sortie together. Togetherness has evaporated with the put-down. A week later, despite the fact that all three had been making reassuring noises about their ability to fend off, if not smother, usurpers, Sainsbury had launched a price war, indefinitely cutting the prices of 300 of its most popular own-brand labels, undoubtedly giving its erstwhile allies something not very pleasant to think about and causing major stress among the weaker chains.

The speed and extent of Sainsbury's reaction suggests that it was not exactly unprepared for its High Court rebuff. Price cuts were only half of a two-pronged strategy. David Sainsbury admitted that sales increases would not be as of yore and that the company would be seeking growth from other types of retailing at home and overseas - the US being the most likely scene of the greatest activity.

At home, food manufacturers would find little comfort in his remark that their prices would have to come down significantly to compete. Costco, of course, was the occasion rather than the reason for all this. The City had already decided that the Big Three's heady growth would not continue and the economic climate indicates that quality and price will have equal importance in the customers' minds for a long time to come.

For the latter, none of this is bad news. The Wall Street Journal, as Peter Wilsher reports in Whose hands on the housekeeping? (p38), had observed that 'those Brits just don't know what discount really means'. They were speaking of retailers, of course. No one watching the flow of British shoppers across the Channel before Christmas, could conclude that they were disinclined to take a little trouble if the discount was big enough.

The British take a certain pride in their reputation for eccentricity but, like the Germans, Dutch and Danes, and everyone else in Europe who has been benefitting by lower prices with the spread of discount stores, they will take advantage of any opportunity which might ease the strain on their pockets.

It is early days yet in the discount business. Costco is shy about its plans but there will, no doubt, be more utilitarian sites from it and from others. It marks the end of an era when the giants never had it so good and, as every cloud is reputed to have a silver lining, it is a welcome reminder that no one is safe from competition.

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