LOVE THEM OR LOATHE THEM, there is something about an annual net profit of £1.6bn that kind of earns respect. As Tesco goes marching on it’s worth remembering that it wasn’t always so. Back in the early supermarket days Tesco did alright with their ‘pile-them-high-sell-them-cheap’ philosophy but they never really stood out from the rest. Then, as supermarkets got bigger, Tesco became totally eclipsed by Sainsbury’s and it took them a while before realising they needed to change their trading philosophy.
IN FACT THE WHOLE HISTORY of supermarket retailing over the past 30 years provides a fascinating study of how shopping trends have changed. In the early days, when stores were side by side on the high street, price really was king. It was common for people to visit three or four different stores for their weekly shop, picking up the loss leaders at each one. Over the years we have seen the emergence of own-brand labels then the second tier premium own-brand labels, all designed to attempt to differentiate one outlet from its competitor and, more importantly, to drive increased margins. As the hypermarkets arrived so did the cut-price petrol – the carrot to persuade people it was worth travelling a distance for their shopping rather than doing it locally. Not many people consider it worth being ‘price tarts’ now – you find the retailer that overall suits you and the weekly shop comes from there. Indeed, Tesco is market leader despite being consistently not the cheapest – a strange paradox considering its origins.
AND AS THE HYPERMARKETS GOT BIGGER the range of goods got wider, not only maximising spend per shopper but also removing the need to visit competitor outlets. Along came George Davis at Asda, and all of a sudden it was ‘OK’ to be seen wearing something that came from a hypermarket. Government restrictions were eased and now they are your local chemist. Retail price maintenance ended and the shelves are full of the top-selling books etc etc. Interestingly the ever-increasing drive to add new ranges, and broaden existing ones, may soon start to have some benefits for us. One Asda near me is having a huge extension built so that it can major on even more non-food lines. The car park space lost for the extension had to be replaced somehow – the solution was to demolish the petrol station from its prime site and replace it with a non-manned smaller one. Another Asda I know is relocating, and the new site will not retail petrol.
THE IRONY IS THAT, having decimated our margins, the hypers are beginning to realise they can make a better return from their resources inside their store than from outside. And with most people in urban locations living within a five mile radius of at least one hyper there is no longer any need for the carrot of subsidised petrol. I know Wal-Mart isn’t really into petrol, and I accept that Asda, although the first to start selling petrol, never provided anything more than fuel and a cabin in order to pay, but sometimes it only takes one player to start something for others to play ‘me-too.’
NOW SOME OF YOU have been criticising me recently for focusing too much on hypermarkets and c-stores and not enough on purely petrol issues. Well it seems to me that the importance of purely petrol issues is tending to diminish in direct proportion to the contribution petrol makes to our livelihoods. To survive we have to be retailers who have the added advantage that we pull customers because we sell petrol. What all this serves to remind us is that retailing constantly evolves and that unless we constantly re-examine what we do we will be left behind.
TWENTY FIVE YEARS AGO when forecourt shops first started, the experts told us to learn lessons from the likes of British Airways (whatever did happen to Putting People First?) and the ubiquitous Marks & Spencer. We can still learn from them – they are great examples of what can happen if you don’t constantly question what you are doing and the way that you do it. Oh, did somebody mention Sainsburys…?