Comment: What can supermarkets learn from the automotive sector?

Supermarkets are facing a turbulent time. The race to the bottom in terms of price has sharpened the senses of the big three (Tesco, Sainsbury’s and Asda), while challenger brands (Morrisons, Lidl and Aldi) have gained ground. Along with senior management issues, accounting errors and Serious Fraud Office investigations, it is easy to see why this is one of the most tumultuous periods to date for supermarket brands.

At one time or another, all industries and sectors face challenging periods. The key to coming out on top is evaluating success elsewhere and applying the same fundamental principles.

The polarisation we are currently seeing among supermarket brands happened in the automotive sector almost 15 years ago. The marketplace, at that point, was dominated by strong mid-level players appealing to a broad cross section of consumers, such as Ford, Vauxhall and Renault. In this period, budget car producers lacked credibility, scale and profile, while premium manufacturers, with restricted product offerings, aimed for upmarket customers and corporate clients.  

The change in the automotive sector began when budget car producers, for example, Škoda and Hyundai,  developed stronger product ranges and focused on dealership marketing, putting value at the forefront of their offerings, in much the same way as Lidl and Aldi have been doing recently.

Tesco, Morrisons and Sainsbury’s are under enormous pressure, while Waitrose is leveraging its upmarket position and becoming more accessible to a broader range of consumers through store expansion and concessions in high traffic areas. The mid-level supermarkets are wising up; starting to become clearer in what they stand for and playing to their strengths. Perhaps they have been taking notes from Nissan.  Premium manufacturers in the car industry also began to leverage their brand strength in the mid-market, perhaps Waitrose should take their lead from Audi, BMW or Mercedes.

As the automotive industry continued to change, the mid-level players began to withdraw from parts of the market.  Some completely repositioned themselves; Nissan abandoned its traditional offering of ‘me-too’ products and adopted a totally different approach with more focus on service.  Aldi, as it focuses its efforts on personifying value offering and in-store service, should take heed.

It is the dynamic nature of change that is the common denominator. The challenger can’t merely undercut the mid-market; that is just an opening shot in this war.  Supermarket brands must establish trust with their customers to be successful in the battles to come, the same way Audi and Škoda have.

The key to success is deciding where to play and where not to play. Tesco’s decision to explore ‘£1 stores’ seems very short-sighted, much like General Motors’ decision to abandon Saab and Chevrolet.  Sometimes less is more. Greed is not good, profit is sanity, but market share is vanity.

• Neil Burrows, Director, Connect Advertising and Marketing