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UK supermarkets big two in a mighty muddle

Tesco loses Clubcard appeal, is Sainsbury's running business "too hot"?

Tesco is having to change all its Clubcard branding after losing an appeal against a previous court ruling that it infringed German discounter Lidl’s trademark use of a yellow square in a blue circle. Even though one appeal judge said he did so “with undisguised reluctance.”

To we ordinary mortals it looked like a clear case of passing off and remedying it will cost Tesco about £8m, it says. That looks modest, given that Tesco stores are festooned with Clubcard signage as it continues its policy of dual pricing (itself being challenged.) Sainsbury’s is just as bad with its copycat Nectar promotions.

Once upon a time British supermarkets seemed deft operators, battering their suppliers into submission to keep low prices for everyone while adding more profitable premium lines like Tesco’s Finest and Sainsbury’s’ Taste the Difference (another Tesco copy) on top.

Now they find themselves in the dock for price-gouging during the cost of living crisis (food inflation at one point reached over 16%) and sacrificing customer service, supposedly to put the saving into prices. Sainsbury’s, under CEO Simon Roberts, is trying to save £1bn in costs; chiefly, it seems, through closing checkouts and cutting staff. It should be obvious by now that, in most businesses, such cost-cutting means worse customer service.

To add to their woes Tesco and, especially, Sainsbury’s were hit by computer fails over the weekend which meant they couldn’t deliver orders and, in Sainsbury’s case, could only take cash in some stores. Not the first time, in our neighbourhood anyway, this has happened at Sainsbury’s.

Back in the day, Tesco went through a terrible period when Phil Clarke took over from long-serving Terry Leahy with Clarke accusing his predecessor of running the business “too hot.” That is, focussing, above all, on cost-cutting rather than investing in the stores. It took former Unilever exec Dave Lewis to sort it out.

Roberts at Sainsbury’s might be accused of the same thing. The company has spent a fortune installing big, Aldi-style self checkouts only to find that the only people who appreciate them are shoplifters.

Roberts was, doubtless, a cost-cutting ace at Boots for his masters, US pharmacy chain Walgreens. But is Boots a retailer to be emulated? Roberts, like Tesco, has a few challenges on his hands.

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