A cautionary Christmas tale about neglecting your customers

A cautionary Christmas tale about neglecting your customers Feature Image

The Sainsbury's Christmas TV commercial, set in the trenches a century ago is dripping in sentiment. But beneath the lashings of sugary stuff there's a bitter story struggling to get out. And if you're in the business of winning the hearts and minds of consumers it's one that's well worth digging up.

Is nothing sacred?

The most obvious story is that of the suffering in the trenches. Many have felt that hijacking this for purely commercial ends smacks of tasteless greed and sickening cynicism. Sainsbury's must have known they were going to invite a barrage of such criticism ' but they went ahead anyway. Why? Because there's another story lurking here. That of the attritional struggle our retailers are currently waging against the Hun. I refer, of course, to the Great Supermarket War.

Desperate measures

Sainsbury's is taking a real pounding from Aldi and Lidl, who have them outgunned on price. So Sainsbury's had nowhere else to go but play the emotion/nostalgia card. Jumping on the WWI bandwagon and going all Hollywood must have seemed like a smart option when they realised they were out of ammo (as in we have nothing meaningful to say for ourselves). Unfortunately for them an awful lot of consumers saw through this diversionary tactic, and spotted the irony to boot.

A supermarket too far

Tesco, ASDA and Morrisons all have their backs to the same wall. All three of them, along with Sainsbury's, rushed headlong into no man's land with no clear strategy other than 'let's open more stores faster than anybody else'. Between 2004 and 2010, Birmingham, for example, saw the number of major supermarkets increase from 19 to 104. And this kind of frenzied growth was replicated elsewhere.

Beating a retreat

For a while it worked well. Tesco, for instance, got to a point three years ago when one in every eight pounds spent in the country went through its tills. But then they started to get bogged down in the mud. Tesco's market share has shrunk from 31.8% in 2007 to 28.7%, the latest figures show pre-tax profits have fallen again by 91.9% and, despite a recent healthy rebound, the shares are currently down about 40% this year.

Sainsbury's losses are less severe, but its shares took a recent tumble when it announced pre-tax losses of '£290 million in the last six months and warned these may be squeezed for years. Morrison's shares have also taken a battering and ASDA is well and truly pinned down. Aldi and Lidl, however, are making significant advances - expanding aggressively they've taken about 7% of the UK grocery market and that is forecast to double over the next five years. Aldi opened 42 new stores last year and attracted 1 million more customers, recently announcing a 65% increase in its UK profits.

Put people before profit

So where did the big four go wrong? They focused on the numbers not the customers. They got fat, complacent, greedy and out of touch with the people coming through the checkouts.

If you want an indication of where the management had their heads, here's a clue. Tesco recently started selling off its jets. Yes, plural. A Gulfstream G550 was being offered for '£22 million (Everyday Value?) at the end of October, but the company was embarrassed by the revelation it had just taken delivery of another $50m Gulfstream at around the same time!

The Germans, however, kept their eye on the ball, controlled costs ruthlessly, and operated on the tightest profit margins, way below Tesco's 6.1%. They also understood that consumers, struggling to cope with a sustained period of falling real wages and rising food prices, were watching the pennies like never before. The result? Having taken Tesco's 'Every little helps' slogan to heart, customers started deserting in their droves.

All four of the big UK supermarkets took their customers for granted. Tesco went even further, milking suppliers for all they were worth, and even being economical with the truth in their dealings with shareholders. Now they find themselves in a position where they've been totally outflanked and any mention of price is like shooting themselves in the foot.

Put the customers first and you'll have the last laugh

So, back to this Christmas and the TV commercials. Sainsbury's, Tesco, ASDA and Morrison's ladle on the sentiment like gravy. But there's little substance in the way of tangible sales messages ' it's all trimmings and no talking turkey.

The Germans, whilst appearing to serve up more of the same, both have a trick up their sleeve ' something of substance to say. Lidl serves up an offering that looks like a cross between M&S and Waitrose. But then those crafty Huns actually name check those two holy cows of the British High Street, before turning the tables entirely. They then proceed to knock the stuffing out of their more upmarket rivals with hard-nosed talk about quality and value ' not in the jolly old Christmas spirit at all!

Then there's Aldi, also with lashings of good cheer. But just when you are expecting the Tesco/Sainsbury/ASDA or Morrison's logo the blighters put a cheeky sting in the tail ' an end frame with the line 'Everyone's coming to us this Christmas'. OUCH!

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