Competitor or consumer – who is the enemy in the supermarket price war?

We'll match anything. Fell over in Sainsbury's? Come to Tesco - we'll push you over twice. (Never said by anyone associated with Tesco). Image Credit: Martin Bodman.
We’ll match anything. Fell over in Sainsbury’s? Come to Tesco – we’ll push you over twice. (Never said by anyone associated with Tesco). Image Credit: Martin Bodman.

If you have ever watched The Big Bang Theory you will be familiar with the game ‘Rock, paper, scissors, lizard, Spock’. It’s exactly like rock, paper, scissors, with added Spock and lizard. But this version of the game needs to step aside, because here in the UK we have a new one: Tesco, Lidl, Morrisons, Asda, Sainsbury’s. It’s a game that has been fiercely played for a couple of years now, but with Christmas coming, the T-L-M-A-S Winter Olympic Championship Tournament League Cup Derby is about to begin.

The prize is a big one: Britons beat even Americans in terms of festive spending, on average splashing out £700 each on festive goods. (Our grandparents would like to remind this point that they only got an orange and the chance to stuff onions into the Christmas dinosaur). We spent £43billion in the last two months of 2013. That’s a sum that is worth fighting for a piece of.

But what is this war being fought for – liberation or occupation? Obviously businesses must make money, but that doesn’t mean they are always out to manipulate us. Conversely just because we are the consumers doesn’t mean we are the ones in control. So while Tesco and Asda staff may meet in each other’s car parks at night and throw stale doughnuts at each other to determine who has the cheapest grapefruit, are the consumers actually benefiting?

Let’s get the obvious benefit out of the way. All this competition has dropped the price of food. After a 0.1% rise in October, food prices were down 0.2% on 2013.

I suppose we could to stop this post now. Yes, it’s lowered food prices this Christmas. That’s a good thing. Let’s all go and buy some After Eights.

But is this not just another way of price-fixing? This is where two or more companies agree to sell the same products for an identical price. With people unable to find it cheaper somewhere else, they have no choice but to pay that price, one that is usually high. With supermarkets only competing to get our attention by matching other supermarket prices they are not trying to give us a good deal, they are simply removing any incentive for us to shop elsewhere. While as customers we are used to looking around for the lowest price, supermarkets are trying to take the initiative away from us by monitoring prices themselves and automatically matching.

[bctt tweet=”Is supermarket Brand Match just price fixing by another name?”]

And if we could have spent less we get a voucher for the difference, even if it’s a single penny. It’s not technically price-fixing, and even if it was the government would have to prove that the supermarkets had colluded together in order to do anything about. But it does raise an interesting question. Sometimes this practice drives down the price of food, however the statistic earlier about the lower price of groceries is not all to do with supermarket price wars. A drop in oil prices has made it cheaper for certain foods to be produced, as well as making distribution less costly. That’s an outside economic factor. That has nothing to do with supermarkets battling to give us the best deal.

And if all Tesco is doing is trying to make its prices identical to Asda’s, are they really even trying to give us the best deal? They are all fighting to keep their customers. That’s what this is about, as no one who shops at Sainsbury’s is going to decide to shop at Tesco because the prices are the same.

But the supermarkets aren’t entirely oblivious to this problem. The price matching system is now firmly entrenched and can be left to its own thing. It may have solved a problem for the supermarkets in the short term, but now they are getting back to the original issue: trying to steal customers from their competitors. How can you do this, when your prices are identical?

It seems the answer for some supermarkets, on some occasions, is ‘dishonestly’.

[bctt tweet=”One supermarket claims to be cheaper than another, but what aren’t they telling you?”]

You’ve probably seen the adverts now, which all the supermarkets seem to be doing, where they show the price of an item of food or drink in a rival supermarket and then give their own, much lower price. So at first glance it seems that Asda’s unicorn litter trays are indeed cheaper than Tesco’s unicorn litter trays. Except that when you look at the small print at the bottom of the screen, you will see that the reason for the huge price difference is usually because the advertising supermarket is running a sale. They have gone into their rival supermarket to find the price of these items, then deliberately put them on sale at a lower price. They then advertise them as though they are just naturally cheaper, knowing that many people won’t bother to check out the small print, or think too far into the matter.

So who is fighting whom? Are the wily consumers, with their demands for affordable goods the enemy of supermarkets, or is it the rival brands who are being targeted? Because matching prices actually does nothing for the consumer. It just forces you to remain shopping with your chosen supermarket, or to move for no reason. And competing on price point for one single item in a store full of millions seems like a cheap and pointless tactic. It’s like going into McDonald’s and ordering the jumbo large deep fried butter lard burger with extra battered chips meal and then asking for a Diet Coke.

[bctt tweet=”Two supermarkets battling over the price of one item doesn’t solve a problem for the consumers.”]

At what point does a savvy customer become a greedy customer?

Listen to this blog post using the SoundCloud player below, or read with your eyes underneath. Don’t forget to check out my Christmas advent calendar of jokes by liking my Facebook page.

Three things have happened recently. Three things of relevance to this post, that is, and technically one of them isn’t recent at all. I’m sure more than three things have happened globally, or even locally for that matter. But I couldn’t exactly start this post with the line ‘1.8 million things have happened recently’. And how do you even define ‘recently’? That changes everything. Crap, this has all gone horribly wrong.

Start again…

Hello.

The three things that have happened that are of relevance are:

  1. Everyone is getting very Christmassy
  2. The new Sainsbury’s supermarket has just opened in my hometown
  3. I saw a blog about people buying eBooks on Amazon, reading them, and then returning them within seven days to get a full refund

These things all combined to remind me of the Facebook status I read about this time last year. It was a status about why people should support their local, independent shops. However, it wasn’t a plea, and it certainly wasn’t motivational. I actually thought it was a tad aggressive, in that it followed the tone of ‘If you shop at the big chain store for Christmas presents you’re wrecking the livelihood of a poor, starving independent shop owner. You might as well go and stamp on their face as they try to eat their pitifully small turkey’.

This got me thinking, and over the year the issue of small shops versus big brands continued to bubble away in the back of my mind. As we approach Christmas, this issue becomes even more pertinent.

We are all just looking for value

The thing is, because that Facebook status seemed to imply that we were doing something wrong by shopping at big stores I naturally thought about my defence to the argument. The main reason that we will shop at the big stores is the obvious one – it’s cheaper. I bought Adobe Photoshop Elements a while back from Amazon. Why didn’t I buy from my local technology shop? Because it was £20 more expensive. £20 is a lot of Smarties. (Note: I tend to measure currency in terms of Smarties, just as I measure calorie intake in terms of Kit Kats – e.g. ‘Wow, that slice of cake was 3.5 Kit Kats!’).

As much as sometimes it would be great to shop at local stores anyway, regardless of the higher prices, I expect many of us just can’t afford to. When we can get more for less, it is so wrong that most of us choose to take it?

The plight of the independent shopkeeper

I don’t blame independent retailers for having the higher prices. It’s a matter of logistics, not greed, I know this. Amazon can sell a CD for half the price of a brick and mortar store, because they don’t have the same costs when it comes to overheads (when you’re a small company, it’s a lot harder to afford the expensive accounts who help you avoid paying tax). If independent retailers matched online outlets, or supermarkets, on price they’d very quickly go out of business.

So it’s not the retailer’s fault that there is such a price discrepancy. Are bigger companies being too ruthless? At what point does having a competitor turn into being dominated by a merciless rival?

Or should it be our responsibility as the consumer to pay the higher prices of independent stores to keep them in business?

Smarts or greed?

I expect a lot of us would like to believe that we are savvy customers (incidentally, I like the word ‘savvy’. People aren’t savvy enough. Whilst I’m on the topic, people need to swashbuckle more as well). We often boast to our friends of the great deals we’ve got.

Where the Amazon e-book debate comes into it, is that I would argue the practice of reading a book and then returning for full refund comes under the category of greed, rather than customer savviness. There’s a difference between exploiting the competitive nature of business to find the best deal on a product, and exploiting a loophole in a system to gain something for free.

But at what point does savviness devolve into greed? I would argue that the eBook thing counts as piracy. But who is it okay to rob business from? Going to a store’s competitor is stealing business from them, but if the other store has a cheaper price, as a consumer would you not be foolish to knowingly pay the higher cost?

And what about preowned games? The practice of trading in games is essentially a highly-profitable rental service for the companies involved in doing so (note – this business model doesn’t work with bandages, soup, or firewood). But it means that the games developers are missing out. They only get money from the first sale, but their game could be sold two or three times over. Think of all the Smarties they are owed.

How much responsibility lies with the consumer?

The problem with the trading-in system with games, or returning eBooks for a refund on Amazon, or just shopping in supermarkets that are cheaper than your local grocers, is one of availability. At the end of the day, we do it because we can. As the blog post about the Amazon returns said, the people returning these books aren’t ‘evil’ – they are just ordinary people who have found a way to make their love of reading completely free (If only there was some organisation of buildings that you could go into and come back out again with free books, which you can read and then return without having to pay a penny…).

At what point does giving the customer value become sticking two fingers up at the people who work so hard to create the things they enjoy in the first place?

But with the rest of life, we know there are lots of things we don’t do just because the opportunity is there. Like playing Wink Murder at a funeral. When it comes to money, things naturally get more complicated, because there is a fine line between usefulness and greed. But the problem with business, is fundamentally it is about making money. As consumers, we can’t be expected to treat businesses like they are charities. But is it OK to frame the issue in such callous black and white terms?

Perhaps, in a world where we throw way too much, can’t pay attention for very long, are used to things being transient, and our communities disintegrating, perhaps it is not such a personal sacrifice to buy one book from your local independent bookstore, as opposed to two or three from Amazon for the same price. Perhaps we need to stop thinking about what we are losing by buying a brand-new game rather than the preowned one, and think about what we gain.

Of course it is easy to say, and not so easy to put into practice, but maybe, if just once in a while each of us did this, we’d be making a large investment in the future of our community, our planet, and our intellectual capacity.

And there would be enough Smarties for everyone.

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