Maybe the Tesco strategic review will spark a little sanity back into food and drink retail in general. The implications are already filtering through with many suppliers, selling products and brands close to the retailers’ specified ‘hurdle rate’, renegotiating furiously. Truth is, it feels like a cycle of normalisation and making things simpler for shopper and retailer alike will most likely turn out to be a good thing.
But brands have got to survive in the short term, and it feels like a good time to be really looking hard at how your brand is positioned. True, it may feel like a ‘Unique Selling Proposition 101’ but the reality of shopping the supermarkets is that most (shall we settle on 90%? 95%?) products sold are ‘me-toos’, forced to differentiate on price alone, copying the livery of the leader and hoping that shoppers make rational, price based decisions alone. For those retailers where price is their positioning, that’s fine: Asda, Aldi, Lidl – let them fight it out and may the best retailer win. But for the others, price is a reassurance, an important part of the mix but not the most important. It is a point of parity not difference.
And this seems to be where the confusion lies, particularly in food retail. Morrisons, in what has been deemed to be a disastrous Christmas trading period, bin their CEO and, in the short term at least, resort to price cuts. Sainsbury’s after a better, but still soft, Christmas trading period do the same*. Tesco hit the nuclear button and do the same**, and in the parlance of an American friend of mine, ‘execute the hell out of it’, with national TV and in-your-face point of sale in store. Even Asda, who had a better time over Christmas, have decided that it will only get worse, and bin*** the senior bods in their marketing team.
But, for all but Asda, this isn’t the winning strategy. At least, not without a fundamental restructuring of what they do, how they do it and who they are – and then, what’s the end result? You become Aldi.
Points of parity can be winning strategies but they require unwavering focus and unrelenting discipline to stay on track. Asda have this. They understand that price is a point of parity and they own it with every ounce of their being. All their activity underlines the point that they are cheaper, even if this is just pricing their diesel at £106.7 vs £106.9 elsewhere. (One day I shall buy one litre and see if they force me to round up or down). They lead on price too – being the first retailer to make a Price Promise, to roll back, to launch a price guarantee (in recent times at least). They’ll be ‘Doubling Down’ on price too – you just watch this space.
Currently, it seems that price is the only promise that matters. But other points of parity can be owned and can be used to win. Take service: Tesco proved that you can win with it, to wit, Every Little Helps. The trouble was, they confused it over time with choice and suddenly their business became riddled with ferocious complexity. Sainsbury’s for many years owned quality, another point of parity, but slowly it has been denuded by time, confused focus and competition.
Now is the time to hunt for genuine, ownable points of difference in retail: ownable by the brand, not just the category. John Lewis is a case in point. If you took their signoff line, the beautiful ‘Never knowingly undersold’ you could conclude that their positioning is price: they offer a guarantee after all. But of course, John Lewis is so much more than this as the line subtly implies. Ultimately, they offer reassurance – of quality, value, service and taste. B&Q is fascinating too: their website was clever domain buying and clever attitudinally too: diy.com / do it yourself. So whilst Wickes own a grittier, trade feel, B&Q own both the point of parity and the liberating attitude of DIY.
Perhaps food and drink retailing is tougher. But Waitrose seem to do it. In the parlance of the common man, they own posh nosh. And then they reassure that you won’t get stitched up through initiatives like their Essentials range, just in case you were wavering. And northern retailer Booths, which many refer to as ‘the northern Waitrose’ are developing a much more specific positioning around regional quality. Defensible? Well they can both be copied, but they can be owned too, and that is where the effort is focused.
Ironically, Tesco, Sainsbury’s and Morrisons have an enormous opportunity. They are in the middle of the market, and whilst that is giving them some short term pain, it also offers them the opportunity to build a differentiating position for most people most of the time. Time will tell if they have the foresight to find it and the bravery to grasp it.
* Without binning their CEO
**Technical term: keep up
David Preston is founder of The Crow Flies, a research, strategy and innovation company that helps brands find a direct route to long lasting success. firstname.lastname@example.org; +44 (0) 7885 408367; www.thecrowflies.co.uk; @crowflieshigh.
© The Crow Flies, 2015