The price war between British supermarkets continues unabated. The economic recession might be over and incomes rising, but the large traditional supermarket chains continue to lose market share to the price fighters Lidl and Aldi.
In 2015 the turnover of Aldi and Lidl increased by 22.6% and 15.1% respectively. In the last Christmas period Tesco invested a lot in special discounts on items aimed specifically at the holidays. Morrisons announced it was lowering the price of over 1,000 items, by an average of 19% for fruit and vegetables. The British consumers profit from the lowest measured consumer price inflation ever. The index was 0% on average in 2015.
Price fighters win ground
In recent years consumer behaviour has changed structurally due to the economic crisis and the rise of the price fighters. More than half of British shop customers does a weekly shop at a discounter. The traditional supermarkets and price fighters have grown towards each other in recent years. The price fighters have come into the inner cities and have widened their assortment. The traditional supermarket chains have sold a large number of their large buildings and reduced their product supply. Tesco, for example, has reduced the supply by around 30%.
Competition for local stores
In the race for 'convenience', the traditional supermarkets have invested in opening small local stores in recent years. The price fighter have also entered the competition with the traditional 'corner shops'. But according to some analysts there are now too many local shops. Morrisons sold 140 of its own local shops last year. The Londis and Budgens chain was sold to the self service wholesaler Booker last year. The expectation is that the convenience sector will stay in strong motion, with winners and losers. A lot of analysts expect a new consolidation wave this year in the convenience sector.
Trouble on the horizon: easyFoodStore & Amazon
It isn't just the convenience sector that is remaining in movement. The price fighters are no longer the large supermarket's only competitors. This months the founder of EasyJet opened the first of what might be a chain of budget supermarkets. In their own words, this supermarket is positioning itself between the food banks and the price fighters. The new easyFoodStore could evolve into a solid price competitor. On the other side of the market, the arrival of Amazon is a long term threat to the traditional 'big four' supermarkets. Amazon is now investing in rolling out the so called Pantry service in the United Kingdom. The Pantry service currently only supplies a small selection of household products, but it is expected that Amazon will expand the service in time with a full market supply. The traditional supermarkets are being forced to invest more in logistics solutions to keep the costs low. Some analysts are expecting supermarkets to differ less in price in time, but more in delivery services.
