Tesco had reportedly pressured its suppliers to drop their prices as part of its preparation for a looming price war between the U.K.’s biggest grocers.
As the coronavirus pandemic threatens another blow of job cut, Tesco puts out a new plan to keep their patrons from moving to low-price grocers. In a report first published by The Grocer, it appears that Tesco is pressuring its suppliers to slash their prices down.
That call to drop supplier prices, according to a Tesco spokesperson, is part of the grocer’s strategy amid the rising competition between low-price supermarkets—Aldi particularly.
Tesco shifts to “everyday low pricing strategy”
The U.K.’s leading supermarket is now pivoting to what it calls “everyday low pricing strategy” as customers turn to affordable and discounted products amid the pandemic. Earlier in March, Tesco launched an “Aldi price match” promotion, which gave patrons the chance to buy products with prices that match those in budget grocers.
The scheme was then extended to about 500 branded and Tesco products around June after the competition increased. However, the price war between the U.K.’s leading grocers has become more apparent this week, as the country recorded another 14 000 job cuts this week.
As a response, Tesco is now urging all its suppliers to drop its prices before the given deadline, which is July 10. If a supplier would not agree, the supermarket says it will see fewer promotions.
“We have been speaking to suppliers about how we can work together to continue giving our customers great value. We do not believe that our customers should pay more for a brand in Tesco than anywhere else,” a Tesco spokesperson told BBC.
Pressured and confused suppliers
Suppliers, on the one hand, are left confused concerning Tesco’s demand. As per The Grocer, a lot of suppliers are worried about the new scheme, particularly with the timescale as well as the lack of transparency.
One supplier told The Grocer that Tesco is placing too much pressure on their businesses to promote and support its price war.
“It is difficult to see what benefits there is in this for us,” the supplier added, emphasizing the supermarket’s confusing system and using jargon like “those who join the journey will be rewarded.”
But as per BBC, the grocer assured that they are “committed to open, fair and transparent partnerships with all of our suppliers.” Tesco also claims that a greater volume of sales will come to those who will agree and slash their prices.
Still, the founder of the Retail Mind Ged Futter, argued that such a strategy had been used before and turned out as a failure. He also emphasized that EDLP, Tesco’s newest strategy, does not work for brands.
“It’s been done before, so why will it be any different this time?” Futter argued.