We spent a record £29.3 billion at the supermarket during the 12 weeks to 30 December, according to the latest figures from Kantar Worldpanel. That’s £450 million more than the same time last year.
That’s good news for the supermarket groups, as today’s results from Morrisons have shown. Sales at the UK’s fourth-largest supermarket chain, grew 3.6% in the nine weeks to 6 January, giving Morrisons its fourth consecutive Christmas of like-for-like sales growth.
According to chief executive David Potts its success was all about giving customers what they want. But tucked away in the Christmas trading update was what really attracted shoppers - not cheery staff and faster checkouts, but last year’s prices. Because amongst all the talk about customer satisfaction, colleague friendliness and checkout experience, which I’m sure is all part of the positive “Morrisons experience”, the real thing that got the tills ringing was low prices.
It’s rapidly becoming clear that much like the beleaguered non-food retailers, the only way the supermarkets have been able to secure sales is by slashing prices. Cue Morrisons and Tesco tripping over themselves the day before to let the world know they had cut prices and had a keen eye on keeping them lower.
Morrisons said it would cut prices by an average of 20% on 935 products, including tinned tomatoes, cereals and multivitamins. Then Tesco said it was cutting the price of hundreds of products this month in some cases by more than 50%.
And we all know why. Two words - German discounters. Ever since they arrived on the UK supermarket scene the focus of the battle for supermarket supremacy has focused on at least competing with, if not actually beating, the likes of Aldi and Lidl at their own game. But it’s proving tough.
Leading the pack on price since day one, Aldi and Lidl had two-thirds of households shopping at their stores over the Christmas period, giving them a combined market share of 12.8% of the UK market. Figures out on Monday from Aldi, showed its sales reached a record of almost Â£1 billion in December.
Aldi’s sales jumped 10.4%, while Lidl’s rose by 9.4%. And that, of course, came at a cost to the UK’s supermarkets. So much so that every one of the major supermarkets lost market share in the 12 weeks to 30 December. Sainsbury’s fared the worst of the big four UK supermarkets, seeing sales fall by 0.4%. Asda proved to be the best of the bunch, with strong online growth of 12% pushing up overall sales by 0.7%. It’s followed in the rankings by Tesco and Morrisons. The only homegrown supermarket group to increase its market share over the period was discounter Iceland, which saw its share of the market climb to 2.3% on the back of a 1.8% rise in sales.
This week sees Sainsbury's, Tesco and Waitrose all issuing their Christmas trading statements. But I think we all know what they’re likely to say. The question is whether any have a chance of beating the Germans at their own game or whether it’s now a dicey race to the bottom for the big four.
These are uncertain times, not just for the supermarkets, but for investors too. But knowing your enemy and what you’re potentially up against can make all the difference - as the retailers know. Timely then that tomorrow lunchtime Fidelity’s investment director Tom Stevenson is hosting his latest quarterly Outlook on the markets - both here and around the world.
Join Tom and me at midday tomorrow where you can put all the questions you have directly to Tom. See you then.