Despite recent research highlighting shopper cynicism of retailer loyalty schemes, Kantar data released earlier this week confirms that Tesco and Sainsbury’s are major beneficiaries, with both growing their market share by 0.4ppts over the last 12 weeks. Lidl’s performance shows similar growth (in sharp relief to Aldi’s drop in share) and is posing questions for other multiples, according to The Category Management Company.
“Lidl’s performance is perhaps even more impressive when you consider that their loyalty scheme, Lidl Plus, is frankly not quite as punchy as the two market leaders,” said Patrick Finlay, co-founder of the category management consultancy,
“The question is how sustainable this will be for Lidl and how Aldi will respond. Price will be the short-term driver, of course, but Aldi and Lidl need to build loyalty as Tesco and Sainsbury’s gain share.”
Finlay suggests that the real challenge is for Asda, who have lost 0.5ppts of market share over the last year.
He said: “Whilst being caught in the middle between the discounters and the market leaders, Asda’s forecourt convenience strategy is sound and will pay dividends in the long term, as it is a great showcase for the larger store formats for the uninitiated and potential Asda shopper. As for the short term, this may be trickier and more worrying, as it may trigger another race to the bottom.”
Finlay noted that for all retailers, the holy grail is to build volume, value and long-term loyalty. Some are doing this well, although volume growth is currently the hardest hard nut to crack.
He stated that for suppliers to ensure their long-term survival, they need to address the challenge through both short-term operational and long-term strategic lenses.
Finlay said: “First, suppliers need to be focusing on what they can do now by getting the basics right. Thinking about how to optimise and protect what they already have. For example, is their range, distribution and channel execution firing on all cylinders? Getting the category management basics right can unlock revenue and volume for the supplier and retailer alike. Taking the heat off whilst focusing on the bigger strategic prize.
“The second thing is to invest in the long term. No one has ever saved themselves rich. It has been proven that investing during the most fiscally difficult times has generated long-term benefits. This can take the form of above-the-line investment, which leads to long-term loyalty. But also by developing long-term strategies, category visions for example. Setting out the roadmap today, by planning a strategic course for the next three to five years to deliver value-added volume. By devising a category vision, suppliers are taking a proactive stance to help cushion some of the unforeseen events caused by inflationary pressures whilst maintaining direction and long-term purpose.”
NAM Implications:
- On balance, it looks like the emerging UK retail Big 4 are Tesco, Sainsbury’s, Aldi and Lidl….
- …with financial issues (debt) constraining Asda & Morrisons in their efforts to regain their original Mults’ status.
- In terms of funding investment in marketing…
- …the growth of Retail Media will limit Aldi and Lidl’s development due to their limited number of supplier brands and resultant First Party Data…
- …vs. what traditional retailers can gain from the generation and sale of good quality data.
