Can the supermarkets take another heavy dose of competition?

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Over the past 18 months, the Supermarket industry has made fantastic viewing for the outside observer; less so for those intimately involved. Brutal price competition from the German upstarts has changed the groceries landscape irrecoverably, as has changing habits and rising customer expectations. The market share of the Big Four has slid from 77% in 2013 to 72.6% today, contrasted with a 60% increase in the share held by Aldi and Lidl. Rumours that Aldi and Lidl will join the online groceries market, in addition to Amazon Fresh, will only add to their woes.

Competition economics suggests that it is madness for firms to compete on price when operating in an oligopoly. Everyone loses out, including the consumer in the long run. In a climate where 50% of their main food suppliers are struggling to stay in business, clearly the continuing fall in prices is unsustainable. But what are they to do?

As Mike Coupe has said, “Supermarkets must reinvent themselves.” They can achieve this by focusing on customer satisfaction above all else, investing in a compelling multichannel experience and developing innovative products which truly delight the customer.

What will happen to the Big Four, including Waitrose and the Co-op, remains to be seen. What are your thoughts?

Spencer Corin – Head of Research

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