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
Please note that articles on MSN Money do not constitute regulated financial advice, which recommends a course of action based upon the specifics of your personal circumstances. The articles are intended to provide general personal financial information. We urge you to consult an Independent Financial Adviser (IFA) before making any important decisions about your finances. You can search for an IFA in your local area. Any statement regarding financial services products and tax liability is based on legislation and tax practices as at 6 April 2011, which is, of course, subject to change. The value of any tax benefits or reliefs depends upon the individual circumstances of the investor. When investment performance is mentioned you should remember that past performance is no guarantee of future performance. Where products have an underlying investment content, in many cases the value of the investment can fall as well as rise. For with-profit based investments, there is no guarantee as to the level of bonuses that will be declared, if any. Where mortgages or secured loans are explained do remember that your home is at risk if you do not keep up repayments on a mortgage or other loan secured on it. All mortgages are subject to underwriting, status and are not available to people under the age of 18.
Would you like to receive offers from retailers – such as discount vouchers or sale previews - from your current account provider?
Thanks for being one of the first people to vote. Results will be available soon. Check for results
- Yes - I'd like to receive any offers that could save me money
- Yes - but only if they were tailored specifically to my spending habits
- No - I already know where to look for vouchers and discounts
- 68 %No - I don't want to be contacted by my bank about anything other than my account