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.

 

Tesco reduce Clubcard loyalty offer?

Tesco’s clubcard as it currently runs is probably the best loyalty programme out there and if Tesco wants to remain that way it needs to ensure that it stays the leader in the field and not go backwards and lessen the offer as Sainsbury’s has. So what has it done?

tesco

The site says:

“In the coming months, we’ll be doing more to help you get the most out of the scheme, such as double points events to help grow your points balance faster and improving our Boost Partners offer,  where you can already get up to four times the value  of your vouchers. We’ll update you with more details on this soon.” And yet they also say customers want it all more simple so let’s hope that the doubling up of points events aren’t restricted to certain items leading to the confusion of prices that they say they are getting rid of!

The Telegraph article Tesco customers “gutted” as supermarket scraps popular double Clubcard points scheme has more.

Tesco appear to be warning customers that this is the last chance to get their points doubled for instore/online purchases. Whilst Tesco may want to reach more people and expand their partner offers there are certainly customers who like to use the boosts in store. Many of us like the boost on wine at Christmas(!) and yet wine isn’t in the last offer so we miss out on that for Christmas! Tesco need to do more about expanding numbers of partners and letting customers know about the offers that they do have For example, many are geared towards family offers or geographically heavy in the south east. Older people, single people etc. do not have quite the choice that families do. Many customers want the treats, holidays and meals etc. but many also want help with day to day living. So taking away the doubling up boost on groceries is a blow. Tesco will need to show that it can and will offer even better deals than doubling up in store by offering at least doubling up the value for things like utilities. Tesco keeps saying they are listening to customers so it should open up dialogue and ask people to email them with ideas of what companies they would like to see in the partner offers!

On first appearance it looks like Tesco are shifting the cost of store offers to partners and we don’t know who shoulders the brunt of those partnerships?! As price wars eventually come to an end, and they will have to do so at some point, supermarkets will need more than price to win and keep customers and loyalty will be become increasingly important to retain. Certainly I am sure people will welcome more choice and more offers but I for one will miss the in store opportunities to use points. How about you?