Supermarkets have opened a new front in their pricing battle, offering Aldi Price matching in their convenience stores. So what can independents do to persuade shoppers they still offer value?

Brace yourselves, indies. The battle for convenience hearts and minds rages on – and supermarkets have turned their convenience store strategies up another notch. This time through price cuts.

Since Tesco opened its first Express store in 1994 supermarkets have pulled all sorts of levers – buying up rivals, developing new formats, introducing new technology, rolling out better own-label lines and more fresh and chilled items, even embedding loyalty schemes within their convenience estates.

But price hasn’t been the sharpest tool in their convenience toolbox. In fact the price gap between the prices in their supermarkets and their c-stores has been widening in recent years. Not any more.

In November, Sainsbury’s extended the Aldi Price Match initiative across its convenience network for the first time, comparing 200 bestselling breakfast, lunch and dinner lines with the discounter in all 800 Local stores. Within weeks, Tesco slashed the price of more than 200 products in its Express stores in response. Smart moves. They help shoppers who are feeling the pinch amid the cost of living crisis while also fighting the stigma that convenience is more expensive.

So, with a convenience price war raging between the supermarkets, how can independents compete? The odds are stacked against them. Higher operational costs, different logistics, smaller buying power and longer trading hours means competing on price is out of the question, especially considering the estimated £666m rise in overhead costs [Association of Convenience Stores, November 2024] convenience stores will face come April following the budget.

“Pricing competition from the mults has to be taken seriously, but independent retailers must remember that we shouldn’t have to resort to drastic cuts that will leave our margins barely above 5% or 10%,” says One Stop franchisee Aman Uppal.

illustration of 'express value' convenience store in a war zone

The wholesaler’s cut

Wholesaler margins also hamper independent retailers, which is a growing concern, according to Select & Save. “Wholesalers should be a route to market, but they’re taking too much margin in the middle from supplier to retailer,” says sales director Barry Coleman. “Independent retailers often operate with thinner margins compared to larger chains but they need to compete on price, making it difficult to maintain profitability.”

More support from wholesalers is critical for the sector, adds James Convenience Retail chairman Jonathan James: “We’re very much in the hands of the buying teams of our respective wholesalers.”

 

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Wholesalers are trying to sharpen their pencils. Nisa, for example, has extended its Mega Deals pricing campaign into 2025, while One Stop has locked prices on over 100 lines until 28 February, including 42 price drops, delivering an average saving of 7.3%. Some symbol operators have gone even further.

Spar wholesaler AF Blakemore has taken the fight to the supermarkets. Since introducing a Tesco Price Match initiative in 2023, over 100 independent Spar independents were signed, it reported last July.

And aping Sainsbury’s move, symbol chain Select & Save launched an Aldi Price Match move of its own in December to enhance “the perception that convenience stores can still compete with the multiples”, comparing prices on up to three branded lines stocked at Aldi per four-week promotional period, spanning all categories.

“Gondola ends, stacks and an abundance of deals are no longer ‘nice to haves’ – they’re essential”

Jonathan James, James Convenience Retail chairman 

In another bold move, Bestway is investing more than £2.5m to reduce the cost of 11,000 branded products across from this month. “This is to enable retailers to make more margin, drive footfall and customer loyalty and, critically, help them maintain their competitiveness against the mults,” says Bestway Wholesale MD Dawood Pervez.

Independents must also capitalise on other value-led strategies like price-marked packs, adds Pervez. They provide “transparency, trust and give customers confidence they’re getting fair prices”.

It’s why the entire 200-strong own-label range of fellow wholesaler Parfetts is made up of PMPs. “Independent retailers may feel compelled to lower prices to stay competitive, squeezing profit margins,” but it’s unnecessary, says joint MD Guy Swindell. “Using PMPs on key items can create a perception of value without broadly reducing prices.”

The 10p ‘crime tax’ crippling independents

As if the new price wars aren’t challenging enough, the cost of crime keeps going up. The Association of Convenience Stores has found there is effectively a 10p crime tax on every transaction that takes place in stores, covering both retailers’ investment in crime prevention and the direct cost of shop theft. Simply put, retailers cannot afford it.

“They need to continue investing in crime prevention measures to protect themselves and their stores [but] when coupled with increases in trading costs and taxes in the recent budget, [the danger is] retailers just trying to stay afloat, rather than investing,” says ACS CEO James Lowman.

The Co-op isn’t stinting. Since 2018, it’s spent £200m on extensive security measures, covering everything from undercover guards to fortified kiosks and dummy packaging.

Yet despite Co-op’s efforts, it still estimated a £39.5m loss from theft during the first six months of last year, 19% higher than in 2023. And the detrimental impact these crimes have on the physical and mental health of shopworkers is a serious concern.

The ACS found retailers suffered over 1.2 million incidents of verbal abuse in 2023, according to its latest crime report.

Even so, Co-op director of campaigns and public affairs Paul Gerrard is optimistic.“Since the Retail Crime Action Plan was published in October 2023, we’ve seen a significant improvement in police response along with commitments from Government,” he says. “Effective partnerships are how we can tackle retail crime; neither business nor police can solve this alone.”

Stackability

Last year, JCR reported a surge in snacks, sweets and soft drinks sales driven by a rollout of PMPs. But value conveyed solely through PMPs isn’t enough to compete with the mults, admits chairman James. “We need to react, ensuring our stores give the perception of value from the moment the customers enter.”

Unlike supermarkets, which have the “luxury” of pushing volume from placing pallets of product in aisles, convenience stores must have “clearly marked stacks in the right locations”, says James. “Convenience has always been associated with slightly higher prices, so we’re coming at this on the back foot,” he says. “Gondola ends, stacks and an abundance of deals are no longer ‘nice-to-haves’ – they’re essential.”

One Stop’s Uppal agrees that how products are displayed in stores and their “stackability” is crucial in conveying value to shoppers. “My strategy is to identify a group of products every week that you can showcase as your ‘wow’ offers,” he says. “With decent margins, good availability, the right PoS, then stacked near the tills and shouted about on our social media channels – it allows us to go toe-to-toe with the supermarkets.

“We shouldn’t have to resort to drastic cuts that will leave our margins barely above 5% or 10%”

 Aman Uppal, One Stop franchisee 

Uppal actually prefers this approach to PMPs. “Only 10% of our products are PMPs,” he says. “That’s mainly because it’s not in the One Stop model, but I don’t think that’s a disadvantage, because when I shout about my offers in store the consumer sees that price drop in front of them, whereas PMPs stay the same price all year round.

“I’m not competing with supermarkets directly in terms of volume but using it to fight against the customer’s perception of the value there is,” he adds. “It’s more of a psychological effect.”

Uppal has also created a ‘Middle of Lidl’ experience with non-food items, such as air fryers, smart watches and fragrances to mimic the “supermarket approach”.

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Source: Alamy

Tesco’s move to extend price matching to Express stores was a first

At the same time as indies consider value perception, it’s crucial they review costs, stresses James. “The budget has put huge pressure on the convenience sector, and we’ve all had to incur significant cost increases just to stand still,” says James.

“Like everyone, we’ve reviewed opening hours, staff levels and community sponsorship for teams and events, not to mention investment. Ultimately, costs will have to be passed on where possible, as the tax costs far outweigh the profits we were making.”

Investment

Spar UK retail and brand development director Ian Taylor believes it’s more important to invest in efficiency than price per se. “The government is expecting independent retailers to bear these increasing costs on their own,” he says. “By streamlining operations through technology, such as ESLs or self-checkout tills, and focusing on energy efficiency, waste reduction and refining their product range, they can take proactive steps to mitigate the impact of rising costs.”

And retailers mustn’t forget their main trump card in remaining competitive against the mults: being local. The best independents have stood out from the major mults through differentiation, in terms of range, fixtures, formats and exclusive NPD deals. But for many shoppers there is still a value in – and a willingness to pay more for – the convenience of shopping locally, and supporting independent retailers in their local communities.

As Nisa retail & sales director Katie Secretan says: “Location is a key strength of symbol and indie retailers, enabling them to position themselves as indispensable to their communities.”

In fact, it’s priceless.

How Tesco has responded to Sainsbury’s Aldi Price Match move

In early November, Sainsbury’s became the first supermarket chain to introduce an Aldi Price Match (APM) initiative in its convenience stores.

Up to 200 everyday items feature each week. The number varies from store to store but Sainsbury’s says the average number is 118 per store. And independent research conducted for The Grocer by ESA Retail found average savings of 19.8% on the items, as well as a marked increase in overall promotions from 388 to 537.

However across the full Sainsbury’s Local range prices were up 0.6% for 2,000 tracked by ESA.

But within weeks Tesco confirmed 200 of its own core grocery price cuts in Express stores. So how to do the two convenience offers stack up?

New ESA Retail research for The Grocer tracking 1,846 products across Express stores found 129 were priced lower in January. The average price reduction was 25p or 8.5%. The largest reductions were for own-label houmous red pepper 182g, down from 55p to 39p – a 29% difference. A 40-pack of Elastoplast water resistant plasters was down 28.8%, to £2.35. At the same time, 309 products increased by an average of 28p (8.4%).

And as per Sainsbury’s the average price per item was actually up 0.8% from £3.73 in November to £3.76 in January. But the period in question has of course seen an uptick grocery price inflation (in its latest findings, Kantar was tracking food inflation at 3.7% in December) and the research did not factor in Tesco’s other key convenience pricing weapon – its Clubcard Prices loyalty scheme.

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How can independent convenience stores defend their prices?