Summary

  • Top Retailers Waitrose and Co-op announce price cuts on essential goods to woo customers
  • Most supermarket majors Tesco, Asda, Morrison, Sainsbury have declared similar sops

This year the struggle to get back shoppers into stores is set to reach new heights for super marketers in the United Kingdom. The adverse effect of the coronavirus pandemic on the earning potential of most citizens has forced them to cut down on their budgets and look for bargains when buying essentials. 

Top Retailers Waitrose and Co-op have announced a price cut of 15 per cent on essential goods to woo customers who are now more budget conscious as their earnings have drastically reduced as a result of the coronavirus pandemic.

The signs of a price war in the industry are now clearly visible. Tesco had reduced the prices on nearly 500 of its essential goods in July. It was soon followed by similar sops by other supermarket majors like, Sainsbury, Asda, and Morrison. 

Other than the threat of the pandemic, the larger supermarket chains are also facing an increased threat from discount supermarket chains like Aldi and Lidl this year. During the previous recession in 2008, these retail giants had snatched away a major portion of the market from the competitors, who missed the opportunity to cut down their prices in time.

The main reason

It is obvious that the coronavirus pandemic is the main reason behind these raining discounts.  The ensuing stricter set of three-tier rules have brought the British economy in a state of acute distress.  Not only did the unemployment levels in the country shoot up to record levels, people who were able to save their jobs saw their earnings go down considerably and were under constant threat of losing their job.

This has made everybody anxious and stingier than before. Therefore, this year prices are going to be the most overwhelming factor in consumer decision making than anything else. 

The year has also not been very good for the supermarket retail industry, as most of the stores were closed due to the lockdown.

Challenges

Most supermarket chains face the threat of price-cuts from Aldi and Lidl. Aldi and Lidl Stiftung and Co. are two of the largest supermarket chains operating in the country. During the 2008 financial crisis, both the companies were able to increase their market share significantly as other stores could not manage to lower their prices. Back then, most of the retailers believed that customers would stay loyal to them despite the state of the economy but were surprised when they started to shift to discount stores for essentials. 

Probably this time around, the supermarket chains do not want to make the same mistake, as the stakes are much higher this time around because of the pandemic.

The festive season

The threat of the pandemic has accentuated on the retail industry towards the end of the year because of the second wave of infections. 

Based on the previous experiences gained while dealing with the SARS and the MERS, it is known that there is a heightened risk of more infections in the winter season. 

As it is being observed in many parts of the United Kingdom and other parts of Europe, the number of coronavirus cases is increasing rapidly. 

Scotland and Ireland are already declared a lockdown and the British government has imposed a new set of enhanced restrictions to check the spread. 

While these developments would certainly have a detrimental impact on the festive season, however, it is unlikely that the whole country would be going in for a second lockdown. 

The fortunes of most industries thus, especially the retail industry, hang in the balance due to the uncertain situation worldwide.

Share price performance: Tesco plc 

Tesco plc (LON: TSCO) is Britain’s largest grocer and supermarket chain operator. The company is the third-largest retailer in the world and has a presence in seven countries across Europe and Asia.

Source- Thomson Reuters

As on 21 October, the shares of Tesco plc have been trading at GBX 213.60 per share (12.19 PM GMT+1) losing 0.19 per cent over the previous day’s close.

Share price performance: WM Morrison Supermarkets plc

WM Morrison Supermarkets plc (LON: MRW) is the fourth largest retail supermarket chain company in the United Kingdom.

Source- Thomson Reuters

As on 21 October, the shares of WM Morrison Supermarkets plc have been trading at GBX 173.25 per share (12.24 PM GMT+1) losing 0.17 per cent over the previous day’s close.

Share price performance:  J. Sainsbury plc 

J Sainsbury plc (LON: SBRY) one of the largest supermarket operators in the UK, which is present in General Merchandise, Clothing, Retail Food, Financial Services as well as Property Investments business segments.

Source- Thomson Reuters

As on 21 October 2020, the shares of J Sainsbury plc have been trading at GBX 203.10 per share (12.21 PM GMT+1) losing 0.49 per cent over the previous day’s close.

 

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