Introduction
Waitrose is a high-class chain of stores in the United Kingdom and mainly deals in food products and grocery. Earlier this year, it announced plans to cut its prices to match those of its competitor, Tesco. Waitrose is the 6th largest retail store in the United Kingdom with more than 228 stores across the region, giving it a market share of 4.3%.
Before the price-cut announcements, Waitrose had differentiated itself from other stores by offering high quality food products to its clients, earning the status of one of the most expensive retail stores in the UK.
The recent price cuts on 1,000 brand lines by Waitrose to match those of Tesco, the 4th largest retailer in the world by revenue and second by profit,s has increased its customer base from the low to the middle- class individuals. The reduction of prices increased its competitive advantage and led to an increase in sales, the Daily Mail reports that the company reported almost 9.5 % sales growth[1] a week after the plan was executed while total sales came to £92.9million, representing a 23.5% increase in sales from the same week in 2007.
The price cuts in Waitrose will cover 1,000 well-known brands such as Heinz, Baked Beans, Bisto, Lurpak, and Hovis[2]. These are products that are used on a daily basis and this outlines the company’s strategy of fighting it out with the industry players such as Tesco and Wal-Mart.
Previously, the company engaged in price wars with other similar premium stores and the move to match Tesco’s prices is a clear change of strategy aimed at attracting low-end customers to its retail stores. Waitrose has always targeted customers on the high end and are willing to pay more for their purchases while Tesco has appealed to all market segments, this marketing strategy has led to a remarkable performance of the latter.
Waitrose stores in Oxford Street, London realized an increase in sales by up to 17% in the first week of the announcement, the strongest performance was realized on the company’s online stores. All the three departments in the store (home, fashion and electricals) had an increase of more than 10% during this period.
A market analyst at Seymour Pierce, Freddie George, says that the sales volume realized after the cuts illustrated that the price-match scheme had not had a similar impact as the introduction of the store’s Essentials basics series of products implemented 18 months ago[3]. Despite the sales growth that marked the price cut, analysts are divided on whether the move will weaken the firm’s high-grade groceries. The Waitrose strategy has created the most rigorous promotional environment the retail market has seen in recent years.
Tesco vs. Waitrose
A comparison of prices between the two retail giants by the Brandview.co.uk is shown below. The survey was carried out between September 20-27.
[4]
The survey shows how the two firms fared head to head among customers. It is evident that Waitrose competed effectively with Tesco despite being only the sixth largest retailer in the market
Still posh?
Waitrose is currently on a roll, says chain store analyst Robert Clark. He mentions that they are expanding their market base at a faster rate than the major players in the retail industry.
Presently, they are growing at a rate of 10% p. a. Earlier this year, specifically in August, their market share was 4.1%, a 0.2 % increase from the same month in the previous year[5]. Clark further says that Waitrose had in fact been expanding its market appeal for some time[6]. The Essentials range of products propelled the market to greater heights and marked a change in its market segment target.
The price-matching strategy seems to be their next rational move. However, the price cuts will have a huge impact on the company’s financial performance, analyst estimate the drop in profitability at £25 million a year, but if the stores can embrace hard work in marketing operations and minimize costs, the effect could be reduced. Therefore, the price cut does not entirely imply that Waitrose will no longer be posh.
Still Pleasurable?
For a long time, stores that attract all market segment s such as Tesco and Morrisons have been criticized for neglecting customer service efficiency partly due to the size of their market and the low prices; Waitrose has banked on this failure by other companies and made shopping a pleasure. However, with the price marching strategy with Tesco, it is likely that the firm will be relatively crowded with clients and shopping will no longer be a pleasure[7].
The beauty of Waitrose’s marketing plan is that it remains a worker’s effort. There are no shareholders demanding better dividends annually, this relieves the pressure off the workers and the firm can expand at its own pace. Moreover, it is good to know that when the car parks begin to choke up with Skodas and Audis- which is its clear objective[8]– its staff will work harder to make the queues short, except that a shopper may find the shelves crammed with vegetables and fruits uncomfortable.
Conclusion
The price matching strategy employed by Waitrose is a marketing employed by most firms to increase their competitive advantage by attracting all market segments. As corporations know that their competitors change prices almost weekly, they cannot know whether their prices are below or above that of their competitor, this may cause lead to a reduction in sales volume. So they state that their prices will match that of their competitor.
Bibliography
Daily Mail. (2010). Waitrose sales grow as customers respond to Tesco price match campaign. Web.
Holiday, A. (2010). Waitrose targets Tesco in new price war. Web.
Just-Food. (2010). UK: Waitrose to match Tesco on 1,000 branded products. Web.
Leake, C. (2010). Top supermarket price cutter is … Waitrose. Web.
Leyland A. & Perett M. (2010). As Waitrose matches Tesco is price serious about price? The Waitrose Essential range has been a huge success. Now Mark Price wants to challenge the big four on brands. Web.
Reynolds, J. (2010). Waitrose Price Cuts won’t devalue Brand. Web.
This is Money. (2010). Waitrose sale up after Tesco price match challenge. Web.
Footnotes
- Daily Mail. (2010). Waitrose sales grow as customers respond to Tesco price match campaign.
- Just-food. (2010). UK: Waitrose to match Tesco on 1,000 branded products. Para. 2.
- This is Money. (2010). Waitrose sale up after Tesco price match challenge. Para. 3.
- Adam Leyland & Michelle Perett. As Waitrose matches Tesco is price serious about price? The Waitrose Essential range has been a huge success. Now Mark Price wants to challenge the big four on brands. Para. 7.
- Adrian Holiday. (2010). Waitrose targets Tesco in new price war. Para. 4.
- Ibid. para. 4.
- Christopher Leake. Top supermarket price cutter is … Waitrose. Para. 6.
- John Reynolds. (2010). Waitrose Price Cuts won’t devalue Brand. Para. 4.