Tesco's first half results were revealed today and the news is generally positive. In a week where the retail giant also announced that they were moving into the home insulation business - the company seems to be continuing to sail through the economic minefield relatively unscathed. With fuel bills ever rising and generous government subsidies home insulation is one business that seems to be booming, and n typical Tesco style - they've moved in for a piece of the pie. Indeed this would seem a much safer bet than their financial services offerings at the moment. Today Tesco Chairman David Reid was at pains to tell us that Tesco is holding up strongly but warning with just a hint of modesty in his triumphalism that Tesco is unlikely to be completely unaffected by current events.
In marketing terms Tesco have started to shift their promotion back to their core business at the checkouts and play up their grocery offering, highlighting value for money. Despite having several press ads banned by the ASA in August for making a comparison against ASDA that it deemed unfair, Tesco continues to position on price in their most recent campaigns in what is likely to be a fierce battle amongst the supermarkets in the crucial run-up to Christmas. Both Tesco and ASDA announced hundreds of discounts across their stores last week heralding an almighty scrap ahead, and today Waitrose's Managing Director, the aptly named Mark Price appeared on Radio 4 stating that he thinks food prices will start to come down after the rapid rises we've seen in the past months.
I for one am currently reconsidering my supermarket shopping habits and I suspect I'm not the only one. In a climate where there are a lot of potential 'switchers', or to put it in political terms - 'floating voters', the fight to retain previously loyal customers will be vital for all supermarkets, and I'm sure those at the 'value' end of the positioning dichotomy will also be looking to recruit those 'trading down'. In my view, Waitrose and M&S are probably the most vulnerable supermarkets in the current climate, as their premium brand reputations may lead even its usually loyal (to the point of evangelism) shoppers to look elsewhere in search of better value.
Mark Price may need to start to mark down his prices in earnest in coming months if he's to maintain his market share...
:~
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