The wallet wins as cash-strapped consumers follow the bargains

THERE has been much debate as to what drives consumers to choose one shopping location over another.

Is it convenience of location, price or quality which governs their choice?

Countless surveys by supermarkets and consumer bodies have failed to give a definitive answer to that question.

In July 2008, the National Consumer Agency studied reasons for choice of supermarket and found that 61% of people selected a shop based on convenience; 31% said price was deciding factor while 21% said quality.

Given the ever increasing number of families where both parents are working close to full-time hours, time for shopping is at a premium. Therefore location of stores is a crucial factor in their success.

According to a survey by the competition authority, Tesco has located almost 70% of its stores in town centres, with a further 21% on the edge of towns. Just 11% are in out-of-town locations.

Lidl has spread itself around a little more widely. It has based 23% of its locations in town centres, 34% on the edge of the town centres and 35% outside the centre but still within the town. The competition authority survey found it had no locations out of town.

Retailers locate so as to maximise profitability. Therefore, unless located in major shopping centres which provide ample trading potential in the countryside, most get as close as they can to the suburban centres. Irish consumers travel on average for 22 minutes to do their primary grocery shopping. Therefore supermarkets locate themselves, at a maximum of 15-20mins drive from their catchment area.

It is often the case that stores outside town centres are considerably bigger than their central equivalents, as the need to offer more choice is necessary to attract customers to drive the extra distance.

However, as the recession takes hold and Finance Minister Brian Lenihan warns the public they are living beyond their means, pay scales are not keeping up with the rising rate of inflation. And so, not only are consumers are increasingly seeking out the cheapest options but they are also shopping in a variety of stores in order to find the best bargains.

That is not just a case of switching between Dunnes and Tesco.

There has been much debate over how different pricing is between the supermarkets for the staple goods, but in real terms the difference between them has been minimal in most cases.

In July 2007, the National Consumer Agency ran a pilot branded grocery price check in Dunnes, Superquinn and Tesco and found that for a basket of 45 of the same goods the price difference between the three was €2.20 or 1.62%.

However, it also found that when Eurospar, Centra and Spar were compared (albeit with slightly different samples and not all products in common) the difference was as much as €7.66.

However, when Lidl and Aldi enter the equation, there is a marked difference. According to surveys by the National Consumer Agency, the two German discount retailers offer the consumer up to 30% savings on a basket of 34 own-brand goods. It is noteworthy, however, that the difference represents a significant closing of the gap by Tesco, Dunnes and Superquinn since last December, when the differential was over 59% on a smaller basket.

The likes of Tesco are now realising they cannot ignore the threat to their supremacy. It has introduced a cheaper product range at prices designed to combat the discounters.

Promotions also have a bearing on where people shop.

Inserts in newspapers by large retailers — most noticeably Lidl, Aldi, Tesco and Dunnes — have increased significantly in recent years. Flagging of beer offers, one off-computer deals or new flat-screen televisions in the national media pays massive dividends for the supermarkets, with stock disappearing from the shelves at a rate of knots.

Figures from the Institute of Advertising Practitioners in Ireland showed that retailers had increased their spend on promotions by 16% this year to €147 million (based on January-to-August data).

They are spending 50% more on online promotions, 33% more on local radio (€11 million), and as much as 28% more on Sunday press (€26m).

Tesco alone spent €4m on advertising in May and June, twice what it spent in the same period last year.

One industry insider said: “The appeal of the one-off offers are often under-rated. The offers are set centrally and are well-documented in the media before the offer begins. Store managers, eager to bump up their turnover, will often compete to get extra pallets of the most desirable stock and junior managers are lambasted for not putting in advance orders for the best offers.”

These promotions are cyclical, often weekly — supermarkets have them planned out months in advance and give their stores ample warning of what is coming down the line so that room can be made for it.

One example was the sale of low price computers in Tesco.

The public were especially attracted to the initial deal because there was the extra incentive of ample club-card points.