Offering deep discounts on leading brands is the main tactic that supermarkets are using to win customers, in an environment where loyalty to one store has evaporated.
The thinking behind a price war is to try to persuade customers to part with cash for something they didn’t go in to buy. The biggest discounts are usually on confectionery, cakes and booze, rather than on everyday items such as milk, bread and corn flakes.
One retailer is selling four bottles of Stella for £4.49, yet two others are pushing it out for only £3. Tropicana orange juice costs £1.90 in one store, but is discounted to £1.56 at another.
You may not have gone into the store for Mr Kipling cakes or a big box of Heroes, but if you find them at a discount, the chances are you’ll snap them up. Retailers tend to pick popular brands, such as Dairylea and Heinz tomato ketchup, for discounts so that they can move higher volumes. Shoppers think they are getting a great deal, even though they are spending more than they intended.
Supermarkets are giving fewer, but deeper, discounts on their bestselling food lines. The big four grocers are putting about a third of all food sales through promotions of some sort. Each has its preferred tactic: Sainsbury’s is pushing customers to switch to its own brands, while Morrisons and Tesco tend to go for hard discounts of branded goods.
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It is often the supplier that suggests a promotion and the cost is split 50-50 with the retailer. The cheapest way to offer a discount is to give the customer extras free: 12 rolls of Andrex for the price of 9 or a longer packet of biscuits.
Supermarkets will often demand a bigger discount from a brand perceived to be secondary, such as Hartley’s jam, rather than a first-ranking product such as Robinsons. The producer goes along with it because it usually means a better slot in the store.
In the run-up to Christmas, goods such as Bells whisky and Bailey’s will be used to lure shoppers in. The drinks manufacturer Diageo is expected to offer heavy discounts on spirits and Waitrose is already offering £6 off premium malts. However, deep discounts increasingly are linked to a minimum spend. Tesco insisted that shoppers had to spend £30 to qualify for its £9 Bailey’s.
Food may be the main battleground, but the supermarkets are also slugging it out to capture toy, DVD and electrical sales after the collapse of Woolworths and Zavvi.
What they do not want to see is people who buy only discounted goods. The ideal shopper is one who is lured away from their usual store by a promotion, and then stays to do their main shop.