BETKO NEWS

BETKO FRESH PRODUCE OFFERS THE HIGHEST QUALITY FRUIT

A South African take at recent retail news by Fred Meintjes

26 January 2012

As South Africans begin to taste the first signs of the competition which results from Walmart’s arrival in the country, the world’s third biggest super market is looking for new ideas after a dreadful Christmas sales period.

For so long now British retailer Tesco has been leading retail expansion which has seen super market power continue to increase around the globe. Last year, however, they got it wrong and are now looking for new ideas to recover.
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t the same time, in South Africa, consumers are beginning to reap benefits resulting from the price-cuts at stores of the Walmart Group, giving them a taste of what is to come as Walmart also expands its influence in the fresh produce sector.

Following its announcement of poor trading over the weeks of Christmas, Tesco issued a profit warning for the first time in 20 years. According to news agency reports Tesco has endured one of its most difficult Christmas trading periods in many years, with like-for-like sales in the company’s domestic market well below expectations.

This happened despite the high-profile launch of a £500m ‘Big Price Drop’ promotion last yea. The impact of the sluggish performance was felt immediately on the UK stock market, with the company’s share price dropping by 15 per cent, following the release of the Christmas and New Year trading statement.

UK analysts said that Tesco had made a mistake by choosing to fight the Christmas sales battle on low prices alone, referring to the retailer's Big Price Drop strategy.

"This festive season was not about austerity," said Neil Saunders, analyst for Conlumino. "Consumers were willing to trade up and sought quality and value rather than just low prices. Tesco's marketing and promotion was not positioned to take best advantage of this."

At Kantar Worldpanel Bryan Roberts said that complacency had played a major part.

"Big Price Drop is clearly not enough to win shoppers," he told the Guardian. "Value is not just about price. It is also about standards, service, quality, and freshness and Tesco has been letting all of these slip."

Chief executive Philip Clarke, who took on the role following Sir Terry Leahy’s retirement last year, said that the company would have to change, and promised to invest millions in improving the quality of its fresh food, its choice of products and its customer service.

He said that in the future Tesco would open fewer big Extra hypermarkets, which were key to the retailer's rise in the 1990s, signaling a possible end to the "space race" that has been raging among the main supermarkets in recent years.

When Walmart arrived in South Africa South African consumers were promised lower prices and in recent week’s it was noticeable that the group’s advertising spend, announcing price promotions, had increased dramatically.

South African fruit growers will echo the statements of some of the analysts who commented on the Tesco performance. A successful marketing programme indeed does not only depend on price and consumers do not always view low prices as guarantee for value for money. It is more than that – it is the quality, freshness and service which in the final analysis will motivate consumers to buy, even in tough economic times.

In South Africa, retailers, including Walmart, will do well to acknowledge this as they fight amongst themselves
 

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