Competition drives supermarket prices down

Sainsbury’s have laid out a battle plan as the UK’s supermarket giants fight for customers. The call to arms comes as a direct reaction to Tesco’s big price drop campaign where prices for 3,000 staple goods including bread, milk, fruit and vegetables have been lowered.

From this Wednesday Sainsbury’s will issue coupons to the value of the difference between its branded goods and those of its rivals, Tesco and Asda.

Around 13,000 products are identified in this price comparison set and as of tomorrow, 12th October should the shopper select an item that is cheaper elsewhere,  as long as they spend a minimum of £20, they will be given the difference back via money or coupons.

The price match scheme comes as the market leaders try to attract new customers amidst a backdrop of difficult trading conditions.

Moneyhighstreet reacted to the move saying: “In reality, whilst this latest deal from Sainsbury’s may not actually save the customer a huge amount, it will no doubt be perceived as being very positive and provide reassurance that they are not being ‘ripped off’.”

Last week Tesco reported a rise in half-year profits despite a fall in underlying sales in the UK. Chief Executive Philip Clarke pointed to a price elasticity trend affecting certain products: “non-food business has been under quite a bit of pressure in the last quarter.”

Meanwhile Sainsbury’s reported slightly better like-for-like sales. For the first six months of the financial year, excluding petrol but not VAT, Sainsbury’s sales rose by 1.9 per cent as opposed to Tesco’s rise of 0.5 per cent.

But whilst this is a victory for Sainsbury’s the results have served to fuel the fire of an already highly competitive industry.

The reaction to the economic conditions from Sainsbury’s and Tesco will not have been received well by Asda who have an existing pledge to be 10% cheaper than their rivals and may now have to react.