We’ve been following the performance of Waitrose, an upmarket UK food retailer (http://www.waitrose.com/), with interest at Wavelength. Over the past few years they’ve done rather well given the economic downturn (see Financial Times, Guardian, Kantar Worldpanel, TNS Worldpanel). The launch of their Essentials range (own brand lines priced just below branded counterparts), ethical sourcing, customer service and store acquisition have been cited as cornerstones of their success. They’re now the fastest growing supermarket in the UK.
This trend is encouraging for brand marketers. Why? In the depths of a recession customers do not appear to make decisions based purely on price. Value based factors also influence the decision-making process. Waitrose have understood and consistently executed a value based brand position. Customers get it. In a competitive market customers know what Waitrose stands for – quality. There’s a clear pecking order. Waitrose rubs shoulders with ‘middle class’ Marks and Spencer (who it has now surpassed in terms of sales based share). It’s positioned slightly above mainstream players like Sainsbury’s and Tesco who position themselves just above Asda and Morrisons who in their turn position above the Aldi and Netto’s of this world. The clarity and consistency of their value and not price strategy appears to have paid off. This is why we feel Waitrose performed so well during the recession.
Waitrose recently ramped up their “Price Match” campaign where it promises to match Tesco (a more mainstream / volume player) for price on one thousand everyday products. (Waitrose Price Match) Now we’re lost. In the depths of a recession some fine tuning of positioning is expected. Why compete on price when a value based strategy has worked so handsomely and market conditions appear to be improving? Once brands compete on price a downward spiral tends to ensue. Witness the UK mobile phone industry with the entry of ‘3’. Pursing a price based strategy leaves one main option. Scale the business to spread fixed costs and so drive contribution margin. Asda (owned by Wal Mart) and Tesco are masters of this art. As part of the John Lewis Partnership Waitrose has some scale. This doesn’t come close to Tesco, Asda etc., though.
We feel this approach will take the Waitrose brand slightly down market. It could confuse its positioning and so its customers. Bad news. It could also force it to lock horns with retail giants such as Tesco. An unenviable task given their scale. We wonder why Waitrose wants to move into the price space when they have competed so effectively on value during tough trading times. If it isn’t broke why try to fix it….?