Morrisons escalated the supermarket price war on Thursday with a promise to match Aldi and Lidl prices with a new loyalty scheme designed to stop its shoppers taking their custom elswhere.
The Bradford-based store’s chief executive, Dalton Philips, said the points-collecting scheme, which also aims to match Tesco, Sainsbury’s and Asda prices on both branded and own-label goods, would be a “powerful new weapon to help Morrisons become fit for the future”.
“There are huge structural shifts going on in how customers are shopping and we are reacting to that,” he said.
Philips admitted that more than half of Morrisons shoppers now also shopped at its rivals Aldi and Lidl. He said the number of customers visiting Morrisons had not dropped, but that people were spending less on each visit.
Details of the new Morrisons loyalty schemes came just a day after Sainsbury revealed a slump in sales and its chief executive Mike Coupe said that the grocery business was changing faster than at any time in his 30 year retail career.
Morrisons is the first of the major chains to attempt to match the discounters on price in a scheme analysts said was complicated and potentially costly.
Only about a quarter of shoppers are thought to use loyalty cards, and discounters only sell about 2,500 products – fewer than 10% of the average Morrisons store – but these items are likely to make up a large proportion of overall sales.
Discounters are an average 15% cheaper than the major supermarkets, but Philips said Morrisons’ prices were already the same as Aldi and Lidl on many branded items. The loyalty scheme would help reassure shoppers so they did not feel the need to spend time visiting several stores to get the best deal, he said.
“We are neutralising price so the rest of our offer can really shine through,” he said. “The discounters have been growing strongly but they only have one thing – price. We are saying we can guarantee price, but you also get 10 times the range, big brands and our butchers, bakers and cheesemongers.”
He refused to reveal exactly how much Morrisons expect the scheme to cost, but said it would be within the existing £300m budget that the retailer has set itself to invest in its prices and product offer during its current financial year.
It has so far spent £135m on cutting more than 1,200 prices and upgrading the quality of some own-label products.
All the major supermarkets except Asda have seen sales and profits slide as cash-strapped shoppers hunt around for bargains. Sainsbury’s recently stopped matching its prices against Tesco and now only matches against Asda. However, neither Tesco nor Asda compare prices with the discounters.
The new Morrisons’ Match & More scheme will launch in 11 stores on Friday morning and will be rolled out across the entire chain by Christmas. For participants who spend a minimum of £15, it offers 10 points for every 1p where Morrisons is more expensive than its rivals. Points can also be collected by buying specific items and fuel. The scheme wil not, however, include the company’s M Local convenience stores, where prices are higher.
Shoppers who amass 5,000 points will receive a £5 voucher which will be valid for up to a year.
Morrisons said it had been testing the concept in a number of stores since April and it was based on technology it had been installing over the last two years. Prices will be checked via the independent company Profitero, which will use online research and visit discounters’ stores around the country twice a week to collect data.
Philips said the scheme would result in the vast majority of the items Morrisons stocked being compared against rivals. He said discounters’ own-label ranges would be set against the Bradford-based chain’s main own-label rather than its M Savers value range, in a bid to compare like with like. Packs of goods that are up to 20% bigger or smaller will also be scooped into the comparison.
Clive Black at Shore Capital said: “Morrisons has turned up the heat on the discounters another notch. The free lunch that the limited assortment discounters, 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.”