Further challenge for the supermarket sector

Further challenge for the supermarket sector

By John Moverley

Further challenge for the supermarket sector
As we start a new year, John Moverley looks at some of the challenges ahead as the supermarket sector seeks to adapt and develop in very changing times. John runs his own consultancy business working within the food sector. He is also a well known speaker and conference host
Well 2014 certainly brought come changes in the sector. The growth in both the appeal and sales of the discounting stores such as Aldi impacted on everyone. There was also increase in demand for internet purchasing, so much so that in the run up to Christmas, some systems were put under very real pressure. Then we had the accounting challenges most notably faced by Tesco and a re-alignment by everyone in terms of the number of brands stocked, value ranges and price comparison tools. All in all it proved a bumpy ride with some faring better than others but all facing a real wind of change.
So what does 2015 offer? At the time of writing, full January updates on sales are awaited but the predictions are that the pressure on the big four is not going to ease. It would seem the Christmas winners will be as last year, namely Aldi and Lidl, Waitrose and M & S, as consumers split their purchasing and shop around, looking for bargains on essentials and trading up on the seasonal luxuries. Industry figures indicate falling sales for Tesco, ASDA, Sainsburys and Morrisons albeit affecting each at different levels. The important factor will be how those under pressure respond to the challenge, certainly not easy. Some of this will clearly depend upon the speed and ability of Tesco to deal with its accounting issues and the extent of further losses sustained.
There are indications that there is a slowing in the growth of the discount stores. Industry sales figures provided by Kantar show growth in sales has declined but still remains at a very healthy figure. Their challenge would seem to be how they can cope with more growth – current stores are becoming more and more crowded as customer flow increases. This is not just about more stores but more space in existing and car parking.
Then there is the issue of internet sales. Anyone who tried to shop or trade on Black Friday knows the pressure that can arise from so many hits on websites and, as referred to earlier, the Christmas rush created strain on systems and capability to deliver across many outlets. Predicting how this trade will further develop is not easy but supermarkets need to ensure they can properly manage it and further development of collect points at railway stations and the like will grow. However how will this growth, combined with the changing sales, impact on the physical stores themselves, not just in terms of number or size but perhaps a review of opening times?
Of course all this change is not without impact on supermarket suppliers. There is much renegotiation taking place on prices and, as many stores seek to further increase own brands and reduce product number, the heat is certainly on for suppliers from large to small.
We are in interesting times, challenging certainly but I would like to think not short of opportunity. The need to innovate and have strong leadership and management has never been greater. Here’s to another exciting year ahead.

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