Bullish Aldi leading discount supermarket charge
Following the news that Aldi’s sales grew 35.7pc £5.3bn in 2013, with profits up 65.2pc to £261m, UK bosses of the discount retailer believe that it has benefited from a ‘lack of trust’ in the traditional supermarkets Aldi and can be seen as ‘consumer champion’.
Figures released from the Institute of Customer Service go some way in supporting this. The research revealed that there is a need to win the loyalty of customers by balancing competitive pricing with appealing customer service.
Key finding from the UK Customer Satisfaction Index also revealed that:
- The retail food sector is the second highest scoring of the 13 sectors included in the reported with a score of 80.9 (above the average score of 76.3)
- Aldi continues to be the leading disruptor in the sector, scoring 84.2-third highest in retail food.
- 58 per cent of customers will not sacrifice quality of customer service in the name of cheaper deals
As Aldi and Lidl continue to disrupt the traditional ‘big four’ in British food retailing, much of the media attention has been drawn to the battle for low pricing. However, the Institute of Customer Service’s UK Customer Satisfaction Index (UKCSI) has revealed there is an additional fight in progress – to win the loyalty of customers by balancing that competitive pricing with appealing customer service.
In terms of customer service the retail food sector is a leading light in the UK economy. Despite the average score for customer satisfaction falling slightly (0.1 points) since January 2014, retail food was the second highest scoring of the 13 sectors included in the study. Food retailers scored an average of 80.9 within the UKCSI, maintaining an above average score (for July 2014 this was 76.3).
Marks & Spencer achieved the highest rating at 85.6, closely followed by Waitrose (85.0). The leading disruptor in the sector, Aldi, scored 84.2 – third highest in retail food and almost eight points above the all-sector average.
The importance of positive perceptions of customer service is demonstrated in the results. The strong correlation between customer satisfaction and business success is clear to see in the Retail food sector – food retailers with UKCSI scores above the sector average delivered 8 per cent average year on year sales growth in the 12 weeks surveyed compared with 5 per cent for competitors with a UKCSI score below the average according to the results of the latest Kantar Worldpanel.
Only 6 per cent of organisations in the sector failed to meet customer expectations – the lowest proportion of all 13 sectors surveyed. Indeed, 76 per cent met customer expectations, giving food retail the highest across the board success rate of all sectors surveyed. The data also shows that 58 per cent of customers will not sacrifice quality of customer service in the name of cheaper deals; a balance of service and price is critical for this majority. A further 26 per cent are more focused on customer service and are willing to pay a premium in order to receive it.
Jo Causon, chief executive from Institute of Customer Service commented:
“Within the retail food sector, customer service clearly has a strong influence on people’s choice of retailer. Organisations in this sector have been quick to realise the importance of maintaining the highest levels of customer service to respond to increased competition in the sector, as well as the ease with which customers can vote with their feet. The sector is well placed to provide examples of best practise to other industries.”
Causon, continued: “As a whole the retail food sector is continuing to perform strongly, with many organisations that perform best in UKCSI reaping the benefits through growth in sales and market share. It is clear that the competitive environment we’re seeing in retail food will not be defined by price alone. Instead we expect to see market share captured by the firms that balance cost of goods with quality of service.”
The UKCSI, carried out by the Institute of Customer Service, involved more than 12,000 interviews with consumers about their customer experiences. During these interviews customers gave insight into 197 of the UK’s leading brands across 13 different sectors. Of these, Retail (food) ranked in 2 nd place, with a drop of just 0.1 points between January and July 2014.