Supermarkets, convergence and market disruption

I have a couple of related questions. First, people love shopping in supermarkets. Why?

Trust – a supermarket brand is trusted by shoppers. They supermarket name is big enough and famous enough and familiar enough to inspire trust. The shopper trusts the supermarket to price its products fairly, and for its produce to be safe – things that can’t necessarily be guaranteed of smaller retailers. This trust is likely to be an unconscious thing – shoppers don’t realize that they are doing it.   Because this trust isn’t rational, it’s very hard to lose.

Interestingly, a new policy by some supermarkets is a form of price matching, whereby you get a receipt telling you how much you could have saved shopping elsewhere, and you get this off your next bill. But this could backfire: if I do a £25 shop and get a receipt for £3.40 off my next bill (which happened recently), then it makes me think that this particular supermarket is overcharging me.

Convenience – think about the size of a weekly supermarket shop for a family. You couldn’t do this by visiting several different retailers in any sensible practical way. Specialist retailers only suit those who shop several times a week, and for busy people, that’s a big ask.

Choice – supermarkets offer lots of choice. Ths choice may be illusory (lots of competing products that are all essentially the same), but the shoppers find such choice reassuring, and it inspires trust in the retailer’s range. This is why cut-down wine offers don’t work in supermarkets. While shoppers are confused by the wall of wine, and lack any sensible means of making a choice, do the choosing for them by selecting a hand-picked range and – however well that preselection is made – shoppers won’t trust it.

Second question: why are most supermarkets pretty much identical?

It’s a classic example of brand convergence. They compete with each other. They hire skilled individuals, and are able to examine areas of business with clever analytical staff who have access to amazing data. Thus they get better at competing, and so all converge into the same brand space: they begin to resemble each other very closely. It’s evolution in action, although in this case differential reproductive success isn’t the driver, profits are.

Wine journalists often criticize supermarket wine ranges. Could wine journalists do any better if they were put in charge of a supermarket wine range? Well, they could make the selection more interesting for wine geeks, but they wouldn’t last long in the job because they wouldn’t make enough money. Supermarket wine ranges look the way they do because this is what people who shop there want to buy. It’s what sells, and sells at a good margin.

Could supermarkets be different? Is there room for a new sort of supermarket that doesn’t look like others? And could a supermarket have a different sort of wine range? My feeling is that the only place in the market would be for a supermarket that is completely different – that disrupts the market. It would have to break some of the current rules for success. It is no good just modifying the existing supermarket model a bit: it would have to shatter it, and build something from the bottom up with a distinctive identity. The model for this is what IKEA did to furniture retailing. Can anyone do this for the supermarket? What might it look like?

1 comment to Supermarkets, convergence and market disruption

  • I think it’s an exaggeration to say people ‘love’ shopping in supermarkets :)

    I remember, as a kid, the time before supermarkets and I don’t want those days to return.

    My mum didn’t work, and she’d have to make several trips to the local shops during the week, walking.

    Meat from the butcher, queue up there, tell the butcher what she wanted, discuss the price, pay and then go to the greengrocers, queue, tell the green grocer what she wanted. You couldn’t pick and choose your own but had to take what you were given and often at the bottom of the bag was a spoiled one. Potatoes covered in mud – which and you paid by weight including mud. Then carry it all back home on foot.

    Now I go to the supermarket by car once per week, parking is easy. Inspect what is on offer, pick my choice of fruits and veg, get everything I need in one go. Meat is pre-cut in clear packs but there’s also a butcher counter at the back if I want a special cut. If I don’t like that supermarket the car makes it easy to go to its competitors

    Those independent shops which survived have upped their game and are more consumer friendly but the old-time independents had a fairly captive market and in a high street with maybe one fishmonger and two butchers and two greengrocers there was little competition and to go elsewhere meant a bus ride.

    For the housebound, like my MiL, we can order everything she needs online from the supermarket and have it delivered to her at a convenient time.

    Supermarkets aren’t ideal but I don’t go misty eyed about the time before them. There are very good reasons why supermarkets succeeded.

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