Blackfriar: Can the big grocers ride wave of consumer optimism?

Asda’s latest Income Tracker shows that shoppers have more money in their pocket than any time in the past seven years, thanks to a combination of plunging air fares​ and a hefty drop in the price of food and drink.

The Leeds-based supermarket chain said consumers had an extra £17 a week in their pockets in April this year​, meaning that ​families across the UK now have £187 a week to spend on things they want, rather than items they need – ​​over 10​ per cent​ higher than this time last year.​ This is the highest level of discretionary spending since Asda started its Income Tracker in 2008.

Meanwhile, according to the latest Nielsen ​report, consumer​ confidence has hit a nine-year high on the back of improving job prospects and low inflation.

The proportion of people feeling now ​is​ a good time to spend ​is up at 45​ per cent​ – the highest level since the question first appeared in the survey in 2006.

The UK Consumer Confidence Index hit 97 in the first quarter of this year, the highest level since the first quarter of 2006 when Tony Blair was in his third term, the base interest rate was 4.5 per cent and Facebook first opened to the public.

Of all the data this week, the CBI was the most gung-ho, saying that retailers are more optimistic about sales than at any time in the past three decades.

It added that retail sales are “bounding ahead” as falling prices and a boost to consumer spending power is giving retailers the most upbeat outlook for 27 years.

Around 60 per cent of retailers saw sales rise in the year to May, with just nine per cent reporting a fall, giving a balance of 51 per cent – far greater than expected and the strongest reading since Christmas.

But will this wave of love for the retail sector translate into better times for Britain’s beleaguered supermarkets?

Are shoppers now so accustomed to low prices they won’t trade up from Aldi and Lidl or will they expect their grocery shopping expectations to improve in line with their new found wealth? Evidence suggests that consumers are happy to splash out on trips to the cinema and holidays abroad, but they’re still demanding rock bottom supermarket prices.

Asda CEO Andy Clarke said: “What I’m seeing in my stores is a customer who’s better off financially than 12 months ago, but one who is still battle scarred and choosing to save rather than spend on those extra treats.”

Nielsen UK managing director Steve Smith said the majority of people are still cost-cutting and this could be a habitual trend in the future.

Meanwhile, the Post Office revealed some interesting research: Asked what steps people take to save money ahead of pay-day, 40 per cent said they hunt out reduced items at the supermarket, 39 per cent said they take home-made lunches to work, 34 per cent miss out on social occasions and 13 per cent skip meals in order to save money in the run-up to pay- day.

This shows that by the end of the month, when people feel poor, they hunt down cut-price food at the supermarket, they skip meals and they take home-made lunches to work rather than buy a supermarket meal deal.

The logical conclusion of this is that when people feel better off they will go back to something more akin to their old supermarket spending habits.

Let’s face it, when you’re feeling a bit better off, who wants a bargain basement discount store when you could have the fresh food offer, service and ten times the number of stock lines that a supermarket offers?

This is a great opportunity for Tesco, Asda, Sainsbury’s and Morrisons to win customers back, but only if they accept that customers want clear, plain and honest pricing – no more misleading deals.

People, unlike politicians, know what a pint of milk costs.