Shoppers in new challenge to food stores

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THE problems facing Morrisons are symptomatic of a “seismic shift” in consumer habits which will impact on all the catch-all supermarkets, according to one of the region’s leading business figures.

Lord Haskins, the former chairman of Leeds-based Northern Foods, said major chains trying to be “all things to all men” risked being squeezed by discount stores such as Aldi and Lidl and higher end food retailers like Marks and Spencer and Waitrose.

Bradf0rd-headquartered Morrisons last week announced a pre-tax loss of £176m and saw its share price tumble after announcing it would be cutting prices to try and head off competition from discounters.

Lord Haskins said: “I think there’s a seismic change taking place in the way we buy food and the way we buy other things.

“Nobody has mentioned the impact of online, the gadget economy, as it were, is having an impact too because people are much more aware of prices than they were in the past. They look on their computers and they say the price at discounter is A, the price in Tesco is A plus 10, I’ll go to the discounter.

“Brands no longer count as much as they did so people don’t feel loyal to brands, they feel much more aware of price and they are much more knowledgeable about prices.”

Lord Haskins, now chairman of the Humber Local Enterprise Partnership, said the major chains had invested huge amounts of money in large stores, meaning when it comes to competing on price “they are too big, they are not designed for the job, they are too complex and there are too many of them and they are too expensive to run.

“I think getting a very large out of town supermarket onto the same cost base as an Aldi or a Lidl is going to be impossible,” he said.

Lord Haskins said retailing was subject to fashions and history showed “names come and go”.

He added: “There are niche retailers at the top end who are still doing alright. There is still a market for high quality food in the Waitroses and the Marks and Spencers and they will probably do ok.

“It’s the ones in the middle who are trying to be all things to all men and women, trying to compete with the discounters, trying to compete at the top end, they are the ones in trouble.

“Their ranges are too big, it’s impossible to manage and I think they are going to get their come uppance.

“It’s very bad for jobs by the way because the supermarkets have been one of the biggest creators of jobs in the last 20 or 30 years.These are relatively low skilled jobs and I can see there being a big problem there.

“On the other hand it’s very good for Mr Osborne because it will mean low inflation although nowadays people worry about too much low inflation.”

Speaking to the BBC, Lord Haskins said Aldi and Lidl were not just winning customers on cost but also by improving the quality and choice of their goods.

However, he said the discounters could lose their competitive edge if they tried too hard to ape the big four chains.

Morrisons will spend around £1bn over the next three years cutting prices to bring them closer to those of the discounters in the hope they can convince shoppers it is worth paying a small amout more for the range and service it offers.

Last year, Leeds-headquartered supermarket ASDA said it would be spending £1bn over the next five years on reducing prices.