Price war among supermarkets will see jobs axed, warn analysts

Infographic by Graeme Bandeira
Infographic by Graeme Bandeira
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AN imminent price war among Britain’s big four supermarkets will lead to job losses across the sector, analysts warned.

Bradford-based Morrisons sparked off a price war this week with the news that it will slash the price of 1,200 products by up to 60 per cent.

Redmayne-Bentley investment manager David Battersby said: “I think it is inevitable there will be job cuts among the big four. Jobs will have to go, especially where roles can be automated. They will take human jobs out of the equation where they can.

“A price war will be good for consumers, but not if you’re relying on a job with a supermarket.”

A leading industry insider added: “Job losses are inevitable. It’s already happened at Tesco and Asda. It’s inevitably going to happen at Sainsbury’s next.

“If retailers aren’t already looking at the structure of the business from a people point of view, they will be soon.”

Asda has already announced plans to axe over 200 managers while Tesco is reported to be looking at scrapping middle management roles and team leader positions as more customers switch to online shopping.

Between them the big four – Tesco, Asda, Sainsbury’s and Morrisons – employ nearly a million people.

There were mixed reactions this week to the news that Morrisons is to cut prices on around 450 brands and 750 own label ranges by an average of 17 per cent.

Morrisons’ chief executive Dalton Philips said the 1,200 price cuts will resonate with lapsed Morrisons’ shoppers as the discounters only offer 1,300 products altogether.

“This is not a temporary skirmish. I’m absolutely convinced that there is a structural change going on in this market. We’ve seen what happened to the airline sector – 50 per cent of it is now discount... It won’t turn back.”

Morrisons said it is willing to take a hit to the bottom line with plans to spend £300m of its three-year £1bn budget on initiatives this year.

But arch rival Leeds-based Asda claimed Morrisons is trailing its lead.

A spokesman for Asda said: “They have had the same awakening to changes in the market that we had 18 months ago. We’ve been implementing it for six months.”

There were also questions about whether the price cuts are genuine reductions or more of the highly criticised “high/low” pricing strategy employed by supermarkets.

An Asda source said: “All of the 13 products that Morrisons has said it has reduced in price have been at that price before.”

Adam Leyland, editor of the supermarket sector’s magazine The Grocer, said: “Of the 13 examples supplied, the vast majority simply enabled Morrisons either to achieve parity with its big four rivals or near as possible.”

Mr Leyland added that job cuts are now a real possibility.

“The bit I don’t follow in the Morrisons’ masterplan is how profits will somehow, magically, recover at some point down the line – without putting prices up again, or cutting fixed cost overheads (ie, staff) significantly,” he said.