Sainsbury’s ends brand match

Sainsbury’s has been consistently the best performer of the big 4 grocery multiples over the last few years, and while Tesco is fighting back, Sainsbury’s is still in the lead. As usual with anything to do with food retailing, there is no single reason. Success in any form of retailing relies on getting a large number of things right. Getting a major factor wrong can be a disaster, but to lead the market most major factors must be absolutely right.

Obviously price is important, but it is not the only factor – product quality, availability, in-store standards, service, to name just a few - are also critical, and one cannot ignore the importance of convenience – many people just go to their nearest store.

We think that Sainsbury’s Brand Match has been a key factor in its recent success, so is it right to be ending it?

Price focus

There’s no doubt that price has become relatively more important in grocery shopping in recent years, that was apparent in research carried out for Mintel’s recent Supermarkets - UK, November 2015 report. We asked people to choose the five most important factors when choosing where to shop for groceries out of a list. Leaving the ranking aside the next chart shows the numbers that chose each factor as one of their five.

Figure 1: Key factors in choosing a supermarket, August 2015
Base: 1,823 internet users aged 16+ who are responsible/jointly responsible for grocery shopping

“Which of the following, if any, best describes why you spend most at the following grocery retailers? Please select up to 5 and rank in order of importance where 1 = most important and 5 = least important.”

[graphic: image 1]
Source: Lightspeed GMI/Mintel

We have already acknowledged once in this comment that success relies on getting a large number of factors right, so we think that this chart is a good guide to what matters. But the most frequently chosen top factors were convenience and prices, with lowest prices just ahead.

We think that price has become relatively more important in recent years partly because of the impact of the recession and partly because of the price-dominated marketing of recent years.

Prices and online

But we also think that one of the major impacts of the development of the internet is that retailers and consumers are much better informed. As soon as retailers launched their online shopping offers, their prices were published for everyone to see. So promising to match competitors’ prices was a simple next step and the impact is obvious in our consumer research.

59% of grocery shoppers thought that the big 4 all have the same price anyway (and only 20% actually disagreed with the assertion).

42% said that they trusted the price matching promises of the major grocers (and only 19% didn’t).

The net effect is that such promises are progressively taking price out of the equation. If low prices are a given, then retailers have to compete on everything else that makes a food retailer successful.

The end of promotions

Another key finding of the consumer research for the last supermarkets report was that people do not want lots of promotions and high-low pricing. In fact they don’t really trust the promotions – 59% agree that supermarkets raise prices ahead of promotions.

What they really want (or say they want) is consistently low prices – EDLP (everyday low pricing). 77% said that and only 3% actually disagreed.

Sainsbury’s new pricing strategy

Put these findings together and Sainsbury’s strategy makes sense. It is moving to EDLP, cutting out vouchers and the majority of promotions. It argues that if it focuses on EDLP, then the brand match becomes meaningless. Customers would trust Sainsbury’s prices anyway.

Its argument makes some sense, but has it moved too soon to drop brand match.

We believe it may have done.

Sainsbury’s is still seen as expensive

We carried out satisfaction research for the last supermarkets report. We measured the level of satisfaction with each factor and for each of the major players against the average for all retailers. Satisfaction with Sainsbury’s prices is the lowest of all the major retailers.

Figure 2: Satisfaction with prices at leading retailers, August 2015
Base: 1,823 internet users aged 16+ who are responsible for grocery shopping

“To what extent are you satisfied or dissatisfied with each of the following at:”

[graphic: image 2]
Source: Lightspeed GMI/Mintel

The trouble is that Sainsbury’s has long been seen as expensive, probably because it aims to offer better quality. The fact that Tesco is little better and Morrisons and Asda are seen as lower priced supports that view.

Brand match is an important way of underpinning trust in prices

As Sainsbury’s is still viewed as higher priced, we think that it is perhaps a little premature in cutting its brand match promise. It needs to establish a stronger price image or wait for pricing to fall down the list of customer preferences. The Brand Match promotion engenders trust in prices and that is essential. When Brand Match goes, will people really trust Sainsbury’s to have the same prices as everyone else? We are not so sure and we think that Sainsbury’s should have waited longer before dropping it.

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