As an advocate of brands and innovation, I never thought I’d be representing the view that we are fortunate to have the discounters here in the UK. But they do play an important role in policing the industry.
Aldi, in particular, has become an anchor for market competitiveness. It is the retailer that sets the base for all others to follow with various price-matching schemes. It’s an important standard to follow, given the supermarkets are increasingly fearful of losing share to the likes of Aldi.
The very presence of the discounters keeps us out of arguments that rage in other markets like Canada. There, no real discounters are present and constant doubts circle around retailers profiteering. No enquiry has yet pinned profiteering on the top five in Canada, but the accusations are rife and shopper trust is low.
Across the month of May, shoppers are boycotting Loblaw, Canada’s leading grocery retailer with 30% share. Among the boycotter demands is that Loblaw stops opposing the launch of the proposed grocery code of conduct launch (a GSCOP equivalent). The government has threatened to enforce retailers sign up to the currently voluntary code of conduct to prevent, among other things, the Canadian retailer practice of deducting huge sums of money from suppliers, which has been blamed by many for driving high inflation.
In the UK, retailers do what they can to engineer profit via share gains, but they are always kept honest by the presence of the discounters. To skim in the UK would be commercial suicide for the supermarkets, given the strength of competition. Ultimately this competition prevents profiteering. Consumers in the UK trust the retailers, even if the government is minded to conduct endless CMA probes. Supermarkets try to avoid putting up their prices unless Aldi does – and in this case, consumers would believe it is necessary.
Customers love the value represented by the discounters, especially in a cost of living crisis. That’s undoubtedly been one factor behind the widespread trust in Aldi and Lidl, which have grown their market share from 8% to 18% over the last decade.
However, that growth has also been enabled by several important achievements: projecting British image, such as Aldi sponsoring Team GB at the Olympics; raising product quality; honing range to become a plausible weekly shop; improving in-store standards, in contrast to the supermarkets pulling out delis and tills; and being easy to deal with.
Some of the major branded suppliers – who would have turned up their noses at supplying the copycat-heavy discounters 10 years ago – now actually favour them as customers. They offer steady demand, no overriders, no promotions and no wrangles, which reduces the amount of management resource needed. In times of capacity challenges, many would rather push their volume to Aldi.
I suppose it’s good that the government and CMA hold our industry’s feet to the fire, but time and again the system is proven sound. Standards are high and misdemeanours low. In fact, the industry polices itself through fair negotiation and healthy competition. Aldi and Lidl play their part beautifully, and the Canadian government would love to welcome them into the fold.
Source : The Grocer
