Who's the discount Daddy?

The focus of our Year 11 economics and business lessons this week has been on business survival startegies in a recession. Discussion inevitably turned to price cutting and to the 'war' amongst supermarkets to attract the value conscious consumer. With annual food price inflation running at over 14% the big four supermarkets are keen to prevent their customers rushing to the big discounters like Aldi and Lidl. In one month alone (July), Aldi's sales increased by 44% as households strapped for cash sought to reduce their weekly shopping biils. Sales at Aldi are 25% up over the year and their market share is growing at the expense of the bif four - Tesco, Asda, Sainsbury and Morrisons.

So, it is no wonder the big four have fought back. Whilst my Year 11 groups raised the importance of cost-cutting, they recognised the even greater importance of cost-effective and targetted promotion during a recession. Students identified Tesco's latest claim to be 'Britain's biggest discounter' as evidence of this trend.

The extent of this promotion can be found in a fascinating article in the Independent from 22 September:

Last week, Tesco launched a major national press campaign to position itself as "Britain's biggest discounter". It booked every full-colour ad slot in the first 20 pages of all the popular and mid-market papers on Wednesday, a real advertising extravaganza and a great example of the power of print advertising.

Except that Tesco's campaign was hijacked by arch-rival, Asda. Having got wind of the Tesco blitz, which media buyers estimated would have cost the supermarket chain around £450,000, Asda booked its own full-page colour ads to run in the same papers on the same day, claiming that Asda sells 3,457 products cheaper than Tesco. Ouch.

This article is well worth reading in full - click here.

Year 11 'thinking skills' were at the fore when one student questioned how retailers such as Waitrose coped in a recession. Would they be forced to follow suit and abandon their business model based on selling quality food at high prices? How could they hope to regain this position in the future if they responded to changing market conditions by discounting?

These were exactly the questions Declan Curry posed to the MD of Waitrose last Friday when he appeared as the special guest on Working Lunch. If you are quick you can still catch the interview on BBC iPlayer by clicking here - the first six minutes and then the main interview 20 minutes in.

I just want to say to my Year 11 group how well I thought they ended a long and tiring first half of term. The demands of coursework investigations and the routine of past paper questions hasn't dulled your brains and your assessment of the strategies we raised was first rate.

No questions in this post (it's half term after all!) - just an encouragement to extend your learning by following up the three links I have given.
Commendations for the best comments to the issues raised as an incentive!