Prices become quite important when customers have a handy reference. Ajay Parekh’s family, who have run a (now Londis) store in Radford, Nottingham, for the past 35 years, have always understood the importance of pricing and competition, what with an Aldi nearby and a Lidl and five Tesco Express stores within walking distance.
Then two years ago, their worst nightmare. Variety retailer B&M (300 stores) opened up opposite. First, it was only short-dated items, then the addition of alcohol.
Fast forward to now and B&M is not only competing head-to-head with Ajay in all his categories, but now with sometimes better date codes than his cash and carry. (Anything to do with new non-exec chairman Sir Terry Leahy being appointed in December 2012?)
And how about these prices? Flora 500g: usually £1.99 from Londis, but Ajay is selling on promotion at £1.79. B&M is selling it at 89p. Yes, you read that right. Choccie digestives: pricemarked £1.85 at Ajay’s and on promo for £1.20. At B&M £1.
Fosters and Carling, £1.10 opposite, 69p a can. Bulmer’s £1.99 - over the road, a quid. New Diet Coke, 175ml, pricemarked £1.75 for Ajay 99p at B&M’s.
And here’s a corker, if you haven’t had your fill already: Black Star Bourbon (IC Brands), pricemarked £7.99 from Booker, £4.99 at B&M.
“It’s now like an Argos, with food,” says Ajay. “Every single category in my store has now taken a knock.”
Ajay adds that even Aldi, right next door in the retail park, is losing sales to B&M, but can, of course, wear it. Ajay cannot.
His weekly turnover of £17K usually drops to £12K between May to September when the students are gone but it’s now £7K and he has turned from being a grocery convenience store to a ‘services’ outlet while B&M is doing the products. He says: “We don’t expect the whole cake - we got by for years on crumbs. But now our business is collapsing.”
Here’s the big question: “Do these manufacturers care anymore?” asks Ajay. “I can understand the short-dated channel, but now they are devaluing their brands.”
I must add here that, while I was talking to Ajay on the phone, a customer came in and I could hear him asking for cashback. He was about to spend 50p and he was asking for £20 cashback. Ajay explained about the bank charges.
I’d like to add to Ajay’s call to the big FMCG brands. Why are you doing this? How is B&M able to buy better than Tesco? Aldi? Do you want your great big brands to just be sold at better than half price all the time through variety stores/discounters? Or is that all they are really worth anyway, and you are still making a profit?
This column is wide open to any big brands to respond.