UK Supermarkets Insist Their Price Is Right

By Beenstock, Sue | Marketing, April 8, 1999 | Go to article overview

UK Supermarkets Insist Their Price Is Right


Beenstock, Sue, Marketing


Leading UK supermarkets continue to market on price, yet the Monopolies Commission is poised to investigate pricing tactics.

Depending on who you listen to, the Office of Fair Trading's (OFT) investigation into profit margins and competition between the big four supermarkets is either an over-simplistic farce egged on by a self-righteous media or a timely opportunity to debate consumers' anxieties.

Either way, last week's leaked news that the OFT's director-general is "mindful to refer" the matter to the Monopolies and Mergers Commission means Sainsbury's, Tesco, Asda and Safeway are going to have to endure critical public scrutiny over far more than their prices and competitive practice for many months to come.

The pricing policy of the big four has attracted consistent, negative attention in recent months.

The Grocer magazine publishes a weekly guide for 33 similar grocery items bought in different supermarkets to show the cost of the average consumer shop. Its most recent table shows Sainsbury's as the most expensive, at [pounds]44.06, followed by Waitrose ([pounds]42.66), Safeway ([pounds]41.82), Somerfield ([pounds]40.28), Tesco ([pounds]39.70), Asda ([pounds]39.52) and Morrisons ([pounds]38.88p).

Retailer disunity

Typically, in the cut-throat world of retail, the supermarkets' united front protesting that they are not too expensive has already cracked.

Asda has attempted to distance itself from the others. It claimed that in meetings with the OFT it had been assured that its "prices and margins are lower and profits are beyond criticism" and that "if everyone's profit numbers looked like yours there would be no problem".

For a marketing sector which in many areas has led the way in marketing and communicating with consumers, the supermarkets appear to have adopted an ostrich-like position to the price issue. While national newspapers and television have been sticking it to them on price, they have buried their heads deeper in the sand.

When the BBC's Panorama devoted a whole programme to the question of 'Are supermarkets ripping us off?', only Safeway was prepared to put up a spokesman to counter the accusations. That PR strategy has changed recently under Baroness Glenys Thornton, the consultant appointed last November to be a spokeswoman for the supermarkets' own trade body, the British Retail Consortium.

She has sought to direct the supermarkets' response to price concerns - and explain some of the complex issues which they claim are being overlooked in a simple but flawed comparison with other countries.

"I think that when dealing with the leaked OFT letter, the supermarkets all gave out a similar message about competition and a positive message about welcoming the inquiry because it would clear the air," she says. (Although this clearly was not true of Asda.) Lady Thornton also suggests that the whole inquiry has been led less by public disquiet about prices, and more by the media.

Ironically, she has some support from the Consumers' Association, often highly vocal on price rip-offs.

Phil Evans of the Consumers' Association says: "The British public haven't traditionally been bothered about pricing, particularly in groceries. Whereas a CD is comparable in price between here and the US, it's an identical product bought for the same purpose. But food is culturally specific and most don't know what individual items cost."

There are other factors that support the supermarkets' case. Some are to do with the 'consumer championing' government's own policies.

Orange juice may be considered to be a basic food these days, yet there is 17.5% VAT on the product, whereas in France there's 5% on all food stuffs.

At the same time, some international supermarket chains, such as Wal-Mart have been put off opening outlets in the UK because of restrictions on out-of-town shopping developments, which are designed to protect existing businesses. …

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