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Discounters define the rules of the game.
Can supermarkets take control in 2023?

For the past 10 years, there has been a repetitive analysis/action ‘loop’ in our industry.

Outside of lockdowns, this has been the cycle. Kantar releases data showing Aldi and Lidl taking share. Analysts review the data. They consider what makes Aldi and Lidl different, and recognise it is primarily “price for quality” or value for money.


Other supermarkets see this picture, and react periodically by cutting costs and lowering prices. We await the next data. When it arrives, Aldi and Lidl have taken more share, and the process repeats.

Are shoppers better off as a result? Costs and prices have been reduced across the market, but most think there is less innovation and stores are typically dowdier. Counters have gone and many big stores look tired – M&S’s new builds and refreshes are a rare exception to the rule.

But are Tesco, Sainsbury’s, Asda and Morrisons really getting anywhere as we go through this loop?

Initially, they did need to look at cost differently, to compete harder with Aldi and Lidl. But more recently, have they been too willing to accept a game in which the rules are set by the opposition? I often hear from suppliers that buyers are talking as if matching Aldi and Lidl is their primary focus. But can they ever consistently match Aldi and Lidl on quality for price across a limited range? Probably not.

I wonder what is happening in towns where all retailers are well established. In other words, are shoppers still drifting from Tesco and Sainsbury’s to Aldi and Lidl in towns where the discounters have long-standing stores? If not, it would suggest the big dynamic in the national market is just that Aldi and Lidl are still building sites and still have many towns to enter. There’s nothing a Tesco or Sainsbury’s can do about that, aside from trying to influence planning.

So it may be a big mistake to look at the national aggregate numbers and assume they tell us how shopper preferences are changing. At some point, they may just be telling us who is building the most stores.

One day, the retailers battling Aldi and Lidl will have to redefine the game to become one they can win. In doing so, they may have to stop obsessing about the national share numbers, or at least analyse them very differently. I wonder if that day will come in 2023.

Jeremy Garlick is a Partner of Insight Traction, consulting with FMCG and Retail companies.  He was formerly Head of Insight at Sainsbury’s, Waitrose and Premier Foods.

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