Stephen Jardine: Can supermarkets win back our love?

Coming hard on the heels of the accounting chaos at Tesco, a 2.8 per cent drop in Sainsbury’s sales saw the share price fall by 7 per cent.

Until now, Sainsbury’s seemed to have dodged the problems facing the sector, but the news means three out of the four major supermarket chains have lost market share in the past year.

While Tesco management stuck their heads in the sand as problems mounted, Sainsbury’s have at least been honest about the scale of the challenge, admitting a fundamental review of the whole business is required.

“Clearly in the last few months the pace of change in our industry has changed beyond all recognition. Customers are shopping very differently to the way they were shopping even a year ago”, new chief executive Mike Coupe said.

The change in behaviour is reflected at both ends of the market, with discounters enjoying phenomenal growth but top-end retailers like Waitrose and Booths also increasing sales. The key to that is the way the top and bottom end of the market have listened to their customers and given them what they want, while the mid-level supermarket giants were busy pursuing their strategy of taking over the world.

Just last week, Tesco was rumoured to be looking to sell off or even close down its video streaming service, Blinbox, after it failed to deliver digital customers as an alternative to Netflix or Amazon. Quite what a grocery retailer was doing trying to build a digital content streaming platform is a good question for the analysts picking over the company’s continuing downward spiral. A great step to halt that decline would be getting back the love consumers used to have for the brand. However, the strategy still seems to be to give the customers what they don’t know they want.

But they’re not alone. This week, images appeared on social media of a Sainsbury’s training poster encouraging staff to push customers into spending an extra 50p every time they shop. For a brand with the slogan “live well for less” it was a revealing insight into how they view shoppers.

So where will it all end? The outlook for Tesco, Sainsbury’s, Morrisons and Asda isn’t at all good.

Last week, Aldi saw profits leap by 65 per cent. The news that they will now sell beluga caviar for under a tenner shows they are determined to reach up and take more and more market share.

With Waitrose reaching down with their well-priced Essentials range, the middle market is going to remain a bloody battleground for the foreseeable future. Who will survive?