What is the value in value? Quite a lot these days if recent announcements are anything to go by.
Home Retail Group, the owner of Argos said the direct to store mixed merchandise chain grew sales by 1.6 per cent in the eight weeks to the end of February. Although sales for the year fell by 0.9 per cent, the stores outperformed City analysts’ expectations.
The real winners in the value end of consumer spending at the moment are grocers like Morrisons, which recorded a profit before tax of £655m for the 12 months to 1 February 2009, up from £612m the year before.
In the statement, chief executive, Marc Bolland, said: “Our focus on fresh food and value appeals to shoppers everywhere and provides a strong platform to take Morrisons from national to nationwide.”
Far from drawing in its horns, Bradford-based Morrisons – which nurtures its northern image and values (good, honest fare at affordable prices) — is set to expand. It has acquired 500,000 sq ft of space from the Co-Operative Group, and plans to open a further 350,000 sq ft of space, primarily in the south east.
The profitability of value goods has not been missed by the upper end of the UK grocery market, with Waitrose (the John Lewis Partnership supermarket chain that traditionally trades on a relatively expensive offering that it says is worth the price) introducing a value range called “essential Waitrose”. It features 1,400 lines of staple grocery items, while emphasising no scrimping on quality and welfare standards — what we might call ‘cheap and cheerful’.
Mark Price, managing director at Waitrose, claims the move’s merely an effort to make it easier for shoppers to find own-label products already in the store. But it can’t be read as anything other than a drive to keep shoppers who are looking more closely at food prices going to his stores for their weekly shop.
The question remains whether the drive to value offers will continue, or will shoppers go back to premium ranges in the medium term?
The last Till Roll report from research company TNS, of the 12 weeks to February tracked the grocery shopping habits of 25,000 households in the UK and found the greatest growth in market share was amongst the value retailers, Aldi, Asda, Lidl and Iceland. While grocery inflation remains a worry, shoppers are going to continue to move towards value grocers.
Talking about value in the global fashion arena, Allan Leighton, a former Asda chief executive, said recently: “There is a flight to value [that] is long-haul and not short-haul. This is not going to be a temporary thing that happens for two or three months”.
There’s no reason why this shouldn’t apply in the grocery sector too.
