Analysts from ING helped to push the share price of Tesco down 1 per cent on 4 July by suggesting that it has its strategy wrong. Their prognosis is not new. For a couple of years, various analysts have said that Tesco needs to start a price war.
What are they looking at? At a price gap between Asda and Tesco, which they say is widening. "We feel that deeper price cuts are the only way to prevent Tesco customers from switching to Asda," ING says.
"Ultimately, lower prices should lead to higher volumes, higher sales and higher profits, which in turn can be reinvested in lower prices."
ING says that if Tesco continues on its current track it will be unable to convince "Tesco-tired customers" to come back to the store.
The analysis is like the rain-laden clouds that have soaked Britain all this summer. It is a known unknown that makes business planning difficult. What investment decisions should a local retailer make? What should your wholesale suppliers do?
ING points out that Tesco responded to the threat of Aldi in the 1990s by matching its prices and living with price deflation for years. At the same period, the independent channel responded with better symbol group offerings, higher standards and stronger disciplines.
Every businessperson needs to make their own decisions. 4 July was also independents day in Britain, one of many initiatives helping to build a positive impression of your shops in the minds of local consumers. Today there are far fewer independents than there were 15 years ago. But the ones that remain are far better.
If Tesco launches a deeper price war, it will be painful. It will hurt Tesco's multiple competitors and it will impact on the shoppers who pass your store. However, surely it is better to plan to win those shoppers now rather than wait and see what the market leader does.
Think about it this way: surely it is better to live up to the promise of independents day!
What are they looking at? At a price gap between Asda and Tesco, which they say is widening. "We feel that deeper price cuts are the only way to prevent Tesco customers from switching to Asda," ING says.
"Ultimately, lower prices should lead to higher volumes, higher sales and higher profits, which in turn can be reinvested in lower prices."
ING says that if Tesco continues on its current track it will be unable to convince "Tesco-tired customers" to come back to the store.
The analysis is like the rain-laden clouds that have soaked Britain all this summer. It is a known unknown that makes business planning difficult. What investment decisions should a local retailer make? What should your wholesale suppliers do?
ING points out that Tesco responded to the threat of Aldi in the 1990s by matching its prices and living with price deflation for years. At the same period, the independent channel responded with better symbol group offerings, higher standards and stronger disciplines.
Every businessperson needs to make their own decisions. 4 July was also independents day in Britain, one of many initiatives helping to build a positive impression of your shops in the minds of local consumers. Today there are far fewer independents than there were 15 years ago. But the ones that remain are far better.
If Tesco launches a deeper price war, it will be painful. It will hurt Tesco's multiple competitors and it will impact on the shoppers who pass your store. However, surely it is better to plan to win those shoppers now rather than wait and see what the market leader does.
Think about it this way: surely it is better to live up to the promise of independents day!
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