Thursday, 5 December 2013

Penny pinching consumerism is nipping Tesco’s profits in the bud


This week Tesco’s blamed the latest drop in sales on a weaker grocery market but both Sainsbury’s and Lidl have shown improvements in the third quarter of the financial year. 

Philip Clarke, boss of Tesco’s the UK’s largest grocery chain, had pointed to the continuing squeeze on household income making the market, in his words, “more challenging for everyone since the summer,” hence the 1.5% drop in like for like sales. In the autumn Tesco had reported a 23.5% drop in profits which perhaps shows the changing trend in consumer habits rather than a weaker grocery market?

Umbrella poll shows UK consumers saving for a rainy day

Since the economic downturn really started to bite deep in the UK, consumers have started to shop around and are sticking to their frugal habits because, as many of us know, we are not out of the woods yet. Even though there is some small upturn in the economy, as people have changed their shopping and eating habits they are tending to keep to these “super scrimping” ways. A report by global research firm Mintel noted that British consumers have as their top priorities, paying their bills and saving for a rainy day. Other behaviour changes such as taking less holidays and working longer hours are becoming part of the norm, whilst cooking meals from scratch and baking are also on the increase.
Younger people, as they watch their parents struggle to pay the bills, are now starting to get the message about saving as well- (although I would probably have to write it in lipstick across the body of Robert Pattinson before my youngest took any notice) -lipstick being the appropriate item of penmanship as sale of beauty products tend to rise during times of economic crisis, with people putting on a brave face and aiming to look their best, hence the “lipstick” effect comes into being.

Consumers concentrating on paying bills

Consumers are moving away from branded products and to the cheaper Aldi/Lidl outlets, and this change to a more frugal and prudent approach seems to be benefiting the next generation of shoppers and spenders. Cooking from scratch, the interest in the “slow food” movement, local produce and farmers markets are also very popular at present as well. For the 82% of Brits who are just concentrating on keeping up with their bills, ensuring they still manage to cook a healthy but economic family meal is very important.
Tesco’s answer to the dip in profits is to improve their online sales approach. They are responding by introducing more “click and collect” drive through points at stores and offering one-hour delivery slots.  The trouble with online shopping is that you cannot be there to spot the great price reductions or spot the yellow money off stickers on the sales bins. Many years ago, when working for a large retail outlet, as soon as I got the pricing gun out around 4pm on a Saturday afternoon in the food department (anyone under the age of 25 is now googling “pricing gun) it was a magnet for would be bargain hunters. They would come into the store around that time knowing that price reductions would start on perishable goods.
Perhaps Tesco’s should do something similar – but like a quick fire on line bidding, whilst doing your online shopping there could be a virtual bargain box and you submit a price and if it matches their in store reductions – you can order it with your delivery. Either that or throw in a free bottle of nail varnish and lipstick with every sack of spuds. If you have any good news stories about bargains you have picked up recently or suggestions for improving the food shopping experience, iRateiSlate would love to hear from you!

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