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Sainsbury’s profits wounded in supermarket price war

Customer service takes a backseat as retailers focus on price-cutting

Sainsbury’s Preliminary Results for the 52 weeks to 12 March 2016 show underlying profit and earnings per share are down this year versus last year.

Underlying Group sales were down on the previous year down from £26,122m to £25,829m. The next quarter, in particular, may show a further decline as Sainsbury’s takes some risks. CEO Mike Coupe says “The market is competitive, and it will remain so for the foreseeable future. We believe we have the right strategy in place and are taking the right decisions to achieve our vision to be the most trusted retailer where people love to work and shop.”

But is Sainsbury’s making the right decisions? Tesco PLC’s Preliminary Results 2015/16 showed positive and improving like-for-like sales growth trends in all regions whereas Sainsbury’s showed a drop for the second year running so where does that leave Sainsbury’s? It achieved £225 million (2014/15: £140 million) of operational cost savings but has this backfired? Nectar points were halved in April of last year and in April this year it ended its “Brand Match” scheme, a move seen by customers as sneaky. Sainsbury’s said it was to concentrate on lowering prices but why it can’t still match prices at the same time so customers can be sure of cheaper prices remains a mystery. Helen Dewdney, The Complaining Cow – consumer blogger and author of “How to Complain: The Essential Consumer Guide to Getting Refunds, Redress and Results!” – says that customers want honesty, transparency and for supermarkets to listen and act and Sainsbury’s doesn’t appear to be doing this of late.

“Firstly reducing Nectar loyalty points in 2015 and abolishing Brand Match in 2016, customers may well be forgiven for thinking that Sainsbury’s is chasing profits through taking away benefits and not on its customers, who will ultimately bring in those profits. How it can say it is listening to customers when no customer I know said “please take away the benefits for being loyal” or “take away the Brand Match I will trust that your prices are low with no evidence” is beyond me.”

It would appear Coupe, may be following much maligned ex-Tesco CEO Phillip Clarke’s business model, with knee jerk reactions, not listening to customers and land grabbing (Argos/Home Retail Group acquisition). Coupe’s predecessor, Justin King, was known for listening to staff and customers and whilst Coupe may want to be putting his own stamp on Sainsbury’s it comes at a risk. Dave Lewis, the current Tesco CEO, has sold off Clarke’s expansion acquisitions and curtailed overseas plans. He has listened to customers, leading on food waste initiatives and getting rid of misleading deals. Whilst still having problems, such as the possible misleading of customers with fake farm names, Tesco appears to be going in the right direction, recently reporting figures that put them back in the black. However, Coupe may be following Clarke’s path in more than one way.


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Tesco results show “every little helps” but “it could do so much more” says consumer champion

Tesco results show “every little helps” but “it could do so much more” says consumer champion
Tesco PLC’s Preliminary Results 2015/16 were announced today and show that Tesco is back in the black. They showed that there was a Group like-for-like sales growth of 1.6% in 4Q, £6.2bn reduction in total indebtedness, including contribution from sale of Homeplus in Korea and that, according to Tesco, “customer, colleague, supplier measures all improved”.

But are Tesco customers really happier?
Helen Dewdney, consumer expert, The Complaining Cow and author of How to Complain: The Essential Consumer to Getting Refunds, Redress and Results is particularly interested in customer satisfaction. The results show that UK customer satisfaction is up 5% over the course of the year. The Tesco Chief Executive, Dave Lewis, says “As a team, we are committed to serving shoppers a little better every day, in what remains a challenging, deflationary and uncertain market.” Having met Dave Lewis a number of times since he started in September 2014, she is confident that he is delivering on his promise to listen to customers better and act upon what they are saying. “The multi buys and confusing pricing strategies Tesco tackled in 2014 was a good move. Customers would like this to see process accelerated in all departments, as it appears to be taking a long time. For example, it is time they sorted out the pricing in cheeses and their fresh salmon seems to now never be on offer but not hugely reduced either. There is still massive room for improvement!”

Brand Match
Other initiatives, such as getting rid of vouchers – which we inevitably lose – and brand matching at the till, are also popular with customers. It remains to be seen whether Tesco’s move to woo Sainsbury’s customers by accepting Sainsbury’s Brand Match vouchers until the end of June, as well as giving their own brand match guarantee on top, is a short term win or if it will keep those customers for the long-term.

Dogged by dodgy labelling
Dewdney warns that although moves are in the right direction for Tesco, it needs to be mindful of Lewis’ promise of transparency. The latest allegations of Tesco labelling their value range with the names of fake farms and misleading customers are not going away and could impact on future trust in the chain.