MarketLine Blog

Supermarkets facing up to the discounters; Asda left behind?

Supermarkets in the UK have faced a tough marketplace in recent years. The recession, and the accompanying squeeze on incomes, has led to many consumers becoming shrewd in their purchases and increasingly looking to find the cheapest option. This has led to a climate in which discounters, and in particular Aldi and Lidl, have been able to thrive. The impact on the big four supermarkets has been evident. Tesco, Sainsbury’s, Asda, and Morrison’s have all seen sales fall and profits eroded.

Asda, Tesco, Sainsbury’s, and Morrison’s all responded to the threat of the discounters by cutting prices. The growth of discount retailers Aldi and Lidl in the UK market has put serious pressure on the big four. Previously the big four faced little in the way of competition from other firms. They largely competed with each other, lowering prices of certain products, while maintaining revenue growth by increasing prices of other products, or using their power to cut the prices they pay to suppliers. However, the threat from Aldi and Lidl sparked price wars on a new scale, with the impact of price-lowering strategies being reflected in sales figures and impacting profits.

Following repeated quarterly declines in sales, Tesco, Sainsbury’s, and Morrison’s have now all begun to see recovery in their businesses. Asda however has not seen a reversal in fortunes. In April 2016, the company announced a 5.7% decline in like-for-like sales, the retailer’s seventh consecutive quarterly decline. In an attempt to combat this, the company announced the launch of a new two year strategy, named Project Renewal, to improve the performance of the company. In June 2016, the company brought in Sean Clarke as the new CEO to continue overseeing Project Renewal and to overhaul the business. The ultimate goal for the company is to claw back market share and reclaim second spot from Sainsbury’s.

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