On Supermarkets, And Cynicism

Tesco has gained some useful free publicity by selling champagne for £8 a bottle, just in time for Christmas.

God knows what it tastes like – some reports say not that great. Because at my local megastore, early on Saturday morning, there was none to be seen.

There was space for about 12 bottles, a tiny stretch of shelving, with the offer on full display. Elsewhere around the store, there was acres and acres of shelves devoted to the full priced stuff, £25, £30 a bottle.

Next to that empty space, though, there was a huge number of bottles of another champagne, at almost £14 a bottle. Claimed to be half price, though these offers are never what they seem.

The way it works is this. Shoppers read about the £8 stuff, and go along to buy it. Needless to say, it barely exists. No supermarket can make a profit at £8 a bottle. They can, at £14. So you can’t get the cheap stuff, but you say, well I want some champagne anyway. You pick up the £14 bottle. The free publicity therefore means Tesco can sell more of the stuff it can make a profit on.

Utterly cynical.

Tesco admitted a couple of months ago that there was a hole in its accounts worth a quarter of a billion quid, because someone had been cooking the books. You’d have to sell a fair few bottles of fizz at £14 to make up the difference.

Still, every little helps.

On Supermarkets

It will not have escaped your attention that the big supermarkets are in trouble, most specifically the two in the middle, Tesco and Sainsburys.

We are shopping more carefully, doing more frequent forays for stuff as we need it rather than piling it up in a massive weekend shop and then throwing amounts away.

We have become accustomed to promotional offers, buy one, get one free, and there is a ratchet effect here. If those offers are not available, we are disappointed, and we spend less.

We are told that the discounters, Aldi and Lidl, are taking market share away from those supermarkets in the squeezed middle. A few years ago, only chavs and those stretching their welfare payments shopped there; the papers are today full of middle class commentators enthusing over how cheap everything is.

It is probably no coincidence that both Tesco and Sainsburys have new bosses, the two most successful chief executives at each in recent years having timed their exits to perfection.

Two personal observations.  About four years ago I sat in the office of a Very Senior Executive at one of the big supermarkets, not one of those two departed bosses mentioned above, while he laid out its plans to expand by building hundreds of thousands of square feet of new megastores.

As we were well into the economic downturn, and the market was at best static, I wondered why this was such a good idea. People were no longer increasing their spending on groceries. Why did we need more retail space to sell the same amount of goods? No, you see, you don’t understand. There were still parts of the country where his company did not yet have a store.

But his rivals did. Plonk yourself down on their turf, become too competitive, and the consequence would be that everyone would have to cut their prices. And, thus, each other’s throats.

This, of course, is exactly what happened, made worse by the arrival of Aldi and Lidl. Those grandiose expansion plans, drawn up by expensive consultants, will have been quietly tucked away in a desk somewhere.

We went to Aldi once. Daughter was just starting the next term at college, and it was the nearest supermarket. We stocked up on dried goods, rice, pasta, tinned food, as parents do, trying to ensure she ate something, anything, once we had left.

It was a surreal experience. It was very cheap, and not a lot of thought had gone into the lay-out, or into making it a rewarding shopping experience. The shelves appeared to have been stacked at random with whatever had come to hand.

At the end of one aisle was a pile of boxed industrial air compressors. About four of them, I recall. I am not sure how many Aldi shoppers, wandering around with their trolleys, will have thought, now, that’s just what I need, an industrial air compressor. Presumably they were very cheap.

I detect signs that the Aldi/Lidl backlash may have started. Several of those middle class commentators have penned sniffy pieces about how tacky it all is, and how it’s not actually that good value. But I am sure there will be more Aldis and Lidls in a decade’s time. And rather fewer branches of Tesco and Sainsburys.