Tesco price cuts to spark a supermarket war
Tesco has announced dramatic price cuts across the board in a move that will ratchet up the pressure on its rivals.
Image: Owen Humphreys - PA Wire
The UK's biggest supermarket will withdraw its huge number of gimmicky promotions and instead slash prices across thousands of products in the run up to Christmas.
From Monday, Tesco says it will reduce the prices of more than 3,000 products - including milk, bread, fruit and vegetables - as part of its Big Price Drop promotion. Future cuts will also focus on "products that families need most," it says in a release.
The news will be welcomed by beleaguered shoppers, who have seen food prices rise at an above-inflation 6.2% over the last year. Sadly, the new price cuts will also signal an end to the popular Double Clubcard points promotion.
Will Tesco outmuscle its rivals?
Rumours that Tesco was planning a big new offensive have been rife this week, and it had been reported that store managers would be called in this weekend to prepare for the drive. Whispers of the news around the City were enough to send shares in Ocado tumbling as the London Stock Exchange opened this morning, although they later rallied.
The online grocer recently launched a Savings Pass scheme that promised to cut prices over and above its existing Tesco Price Match guarantee. Tesco's anticipated move may well be seen as an attempt to use its substantial financial clout to outmuscle smaller but increasingly competitive rivals.
Ajay Bhalla, Professor of global innovation management at Cass business School, said: "Tesco has come under some pressure as we have observed parity in pricing strategies deployed by its competitors ranging from Waitrose to Morrisons. However, with enviable cash position and scale it is in a most comfortable position to use short-term tactics that cause pain.
It may not all be good news
He added that "Ocado's business model in particular is vulnerable to multiple pressures" that could see it struggle should dramatic price cuts take hold across the board.
"Lacking physical presence, reliance on well-off customer segments which are being squeezed by economic environment, Ocado will need to exercise some creative initiative to retain and expand its customer base in the current market."
The move may also pose problems for the likes of Asda, who currently operate a guarantee to beat grocery prices at Tesco, Sainsbury's, Morrisons or Waitrose prices by 10%.
So while the price cuts will be great news in the short term, they could be damaging to the industry as a whole, potentially leading to a less competitive market in the longer term.
So food prices have risen by 6.2% over the last year !!
There was me thinking that it was 26.2%
Who made those calculations?
What a load of crap! Tesco couldn't care less about its customers, their only interest is with the shareholders - hence record profits whilst everyone else has to tighten their belts!
An example, at Tesco in West Yorkshire unleaded petrol (last week) was 4p per litre cheaper than in Tesco East Yorkshire! Why, because when I queried such a price variation last year with Tesco they basically said they charge what the market will stand, i.e. if they think the East Riding is more affluent, they will charge more!
As for this promotion - they will just screw their suppliers and still maintain the same profit margins - just wait til the next results are posted if you don't believe me.
And finally, they are quite willing to shout this promotion from the rooftops, but are less reluctant to tell us that they are halving Tesco clubcard points! Incidentally, and for those of more mature years - did you know that B&Q have also halved their Wednesday discount to pensioners! Again a big company happy to shout about the scheme when it started, but very reluctant to say anything when they change the rules.
I am afraid it is all part of Rip off Britain - we are screwed (metaphorically) from every angle and no one in government has the balls to take on the big companies, whether they be supermarkets, utility companies or petroleum suppliers!
Just to add to my earlier comment, Morrisons are not only cheaper than Tesco, their products look and taste a whole lot better as well, SORRY if the truth Offends you.
Some poor supplier or suppliers have probably had a phone call, rite pal were cutting 3,000 prices next week, you people better re-jig your prices or its goodnight Vienna.
Tesco are the biggest rip off supermarket chain going, they are forever putting up prices, some by 20%. or more. I stopped shopping there 2 months ago after putting up with it for years, no more.
They will continue to make multi million pounds worth of profit.
If you repeat it often enough people will believe you, they will now bang on about how much they have reduced the cost of food for the working man.
Rubbish.... Rubbish..... Rubbish...
They will screw the suppliers to the boards....... They need to!!!.
A little of the savings will go to the customer!!.
Most of the savings they make will increase the profit margins.... !!!!
Worse than Bankers
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A new study suggests a typical financial emergency costs around £1,200 - would you be able to raise that kind of money within a month?
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- Yes - from my savings
- Yes - I could put it on credit
- Yes - I could borrow from family or friends
- No - raising that kind of money in a month would be impossible