Sir Terry Leahy, the chief executive of Tesco, urged retailers to focus on value at the industry’s annual conference today.
He told the British Retail Consortium (BRC) event that the situation on the high street was “very fluid” and urged other retailers to focus on value for money to attract and retain customers.
The head of the UK’s biggest supermarket chain, which introduced more budget products and started selling men’s suits for £25 in the past year as the downturn deepened, said that consumers were increasingly focusing on value for money over other factors, such as convenience.
Sir Terry said: “Loyalty has a price. It may demand short-term pain, such as investing in lower prices, but it delivers medium and long-term gain. All of us here today are grappling with the toughest trading conditions in our lives. Confidence is slowly seeping back, helped by lower interest rates, energy and fuel deflation, and, of course, falling food prices. But clouds remain, the darkest being unemployment.”
He predicted that consumers’ concerns about the environment would re-emerge with greater prominence as the recession eased.
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The high street has suffered in the past 18 months as consumers have tightened their belts, with a slew of retailers, including Woolworths and Barratts, going into administration. This week the BRC reported a 0.8 per cent fall in like-for-like sales in May, although analysts noted that that was against tough comparisons with a year earlier.
Jim McCarthy, the chief executive of Poundland, said: “I think the value retailers were optimistic; some of the others were a lot more challenged. We need to provide what customers want in a value-driven environment. At Poundland, we want the perceived value of products to be considerably greater than £1.” Operating profits at the discount chain rose by 47 per cent to £11.8 million in the year to the end of March.
About 11 per cent of Poundland customers come from the more prosperous AB bracket. The retailer, which opened 41 new stores last year, some of them in former Woolworths premises, has started providing a range of better quality products for £1 to target these new customers.