October saw grocery retail heavyweights Tesco and Sainsbury struggle under a fierce attack of almighty discount chains. Poor sales forecasts have forced big player to revise their strategies in an attempt to woo customers spoilt by cheap deals. Harsh reality calls for brutal measures, such as radical price cuts. 

The market has changed dramatically, forcing struggling supermarket chains to fight back to survive. Discounters remain the main challenge, followed by a growing popularity of online grocery shopping. The large supermarkets see they market share shrink rapidly as customers take more to online shopping and choose cheaper downtown discounters over megastores at the city's outskirts.

Out-discount a discounter?

According to Morissons CEO Dalton Philips, the current predicament of the large grocery store chains is similar to that of the airlines under the attack of no-frills carriers. Low-cost operators snatched a large chunk of the market from regular airlines by offering cheaper flights. Perhaps supermarkets learn from other industries' mistakes so that the likes of Tesco or Asda do not share the sad fate of one-time market leaders Kodak and Nokia. Unable to adapt to a rapidly changing industry, both of them were forced to bid farewell to their market dominance. The point is that unless the middle market fights back it is bound to pay a huge price. Morrisons has already reduced prices on 1,200 of its products by an average of 17 percent at the cost of one billion pounds.
With Sainsbury's sales shrinking by 2.8 per cent, three out of four major British supermarket chains saw their market share melt over the past year. Funnily enough, this shift in shopping patterns is reflected at both ends of the market. Discounters are thriving, but also upscale retailers like Waitrose report growing sales. It seems that cheap deals are not the only recipe for a market success.

It's the 8-80 concept that is dead, not the supermarkets

If slashing prices is not the only viable option, what else can supermarkets do to get back on track? The key to prosperity of both discounters and top-end retailers is that they have carefully listened to their customers and provided them what they wanted. Meanwhile, the mid-level supermarkets pursued their strategy of conquering the whole world.
The truth is that you cannot please everyone all of the time. Yet most supermarkets were founded on the idea that they can provide everything to everybody. Based on the 8-80 concept, the strategy adopted by large supermarket chains was designed to satisfy the shopping needs of all consumers from 8 to 80. Retailers who remained faithful to this concept are slowly losing their market share. Those who discarded the old strategy and managed to found their niche on the market are thriving.
To survive, grocery retailers must do two things. First, they need to understand their customers and know who they want their customers to be. Secondly, they should stop whining about the losses they have incurred. Again, one cannot please everybody, so the best strategy for mid-level supermarkets is to identify their strengths and build on that. This way they may still catch up with price-slashing discounters like Aldi, which sells beluga caviar for under a tenner.

Sources: www.theguardian.com; http://www.scotsman.com/; http://www.producenews.com
Photo: http://www.geograph.org.uk/