Morrisons may have discovered discounters Aldi’s and Lidl’s 'kryptonite' with the announcement of its price match points system ‘Match & More’ yesterday (October 2), according to Shore Capital analysts Clive Black and Darren Shirley.
“The free lunch that the limited assortment discounters (LADs), Aldi and Lidl, have had in recent years in the UK is coming to an end, in our view, as imploding superstore groups finally react,” they said.
“The end of the cheap feeding extravaganza for the LADs is long overdue, commencing as it did in 2013 with Asda simplifying its offer and cutting prices.”
Troubled retailer
Troubled retailer Morrisons had “turned up the heat” another notch after announcing its points system yesterday, they said.
The new card-based scheme would give Morrisons’ customers points on products, which can be redeemed for vouchers, if they could be found cheaper at another of the big four or the discounters.
Although the new system was Morrisons’ latest attempt to take on the discounters, Black and Shirley still questioned the virtues of points cards and loyalty schemes.
“We can imagine Aldi and Lidl playing much mischief with Match & More, not least because it may be reminding customers each week how much more expensive Morrisons is, a failure of Tesco’s ‘Price Promise’,” they said.
Furthermore, Black and Shirley challenged why Morrisons had not tried to extoll its available resources into a more democratic process that looked after all of its customers in the same way, instead of driving down prices.
Could not compete
The discounters could not compete with Morrisons’ product range, counters and services, they pointed out.
Loyalty cards were also a thing of the 1990s as loyalty meant nothing to savvy consumers anymore, who were more concerned with finding a bargain, they added.
“We have to say that we struggle with the concept; that said it will be the customers that will ultimately prove us right or wrong,” said Black and Shirley.
More to the point, neither Aldi nor Lidl had points systems or loyalty programmes and yet continued to outperform Morrisons – “they just have the most simple offer possible”, they added.
Meanwhile, Morrisons revealed half-year profits down by more than 30% last month, as a result of sharper competition from the discounters.
Its pre-tax profits also fell to £239M in the six months to August 3, compared to £344M for the same period last year.