Changing times at Shropshire supermarket checkouts

"When I go in the supermarkets, I see people in Tesco and Asda uniforms shopping in Aldi and Lidl," observes Wolverhampton University's retail expert, who is from Shifnal.

Not a scientific study by any means, but it probably goes some way to explaining the unprecedented pressure the 'big four' supermarkets are facing at the moment.

A more mathematical analysis, by analysts Kantar Worldpanel, reveals that over the last 12 months Britain's four biggest food retailers – Tesco, Asda, Sainsbury's and Morrisons – have lost sales worth a total of £4.4 billion to smaller rivals.

Squeezed at the one end of the market by budget retailers Aldi and Lidl, and at the other by the more upmarket Waitrose, the big four are seeing their dominance challenged like never before.

Aldi, in particular, has seen its sales grow by a staggering 33.5 per cent over the past year, and last week announced 75 jobs at its stores in the West Midlands. Few Shropshire market towns are now without either an Aldi, or Lidl store.

Waitrose also achieved its highest ever market share of five per cent. The biggest losers, by contrast, were Morrisons and Tesco, which actually saw their sales fall, despite a growth in the overall market from 2.2 per cent. So why are Britons turning their backs on the big-name retailers they have been in love with for so long?

Simon Purkess, a partner at financial analysts KMPG, says the reasons are manifold. Like Professor Haynes, he says the financial troubles of the last six years have led to people becoming much more savvy in their retail habits, being that shopping around for the best offers, or venturing into stores they might in the past had preconceptions about.

"We have had five or six years of a real squeeze, and the consumer's habits have changed dramatically," says Mr Purkess.

"Everyone wants value, everyone wants a bargain. That doesn't mean cheap, but most of the supermarkets are offering two-for-one deals.

"I don't know about you, but I won't buy household goods unless they are on offer. Things we don't need to buy every week, we can wait until an offer comes up and then maybe stock up. I'm not going to pay the full price for anything."

At the same time, Mr Purkess says the budget retailers such as Aldi and Lidl have also upped their game a lot over the last few years.

"Six years ago, Aldi and Lidl were very much the poor relations, known mainly for selling tinned goods we hadn't heard of," he says.

"Now you can buy products that are as good, if not better, than in the big retailers, they have won awards. There aren't the number of lines that there are in the big four, but they are increasing their range."

That would certainly explain why Tesco, Asda and Morrisons have lost market share to these two new cut-price contenders, but why has the more expensive Waitrose, with bases in Shrewsbury and Newport, emerged unscathed from the so-called flight to value?

"You have to remember that there are different inflation rates for different people," says Prof Haynes.

"For those on the lowest incomes, the rises in the cost of living as a percentage of their income has been greatest, hitting them hardest, but the typical Waitrose customer has been far less affected," he says.

But another factor is, just as the discount retailers have been seeking to embrace a more upmarket clientele, stores like Waitrose have also been looking to broaden their customer base. The chain recently introduced its Essential Waitrose line, claiming it can now compete with the big four on price. Gimmicks such as the free coffee offer loyalty-card offer, which has provoked the ire of more traditional customers, shows that the company is trying to attract people who might not have previously ventured through its doors.

In this respect, stores such as Tesco can also be considered as victims of their own success.

"Tesco did very well a few years ago, it was the first really to promote value as the centre of its strategy, but the problem is it has become very big," says Mr Purkess.

Pressure comes from a third direction, says Mr Haynes, in that there are a growing number of retailers outside the main supermarkets who are trying to grab a share of the food grocery market.

"Convenience stores have been with us for a long time, but a few years ago you would not have been able to buy food from Poundland or the 99p Store," he says.

"B&M Retail now has now got quite an extensive food range as well, and stores like Iceland, which were previously thought of as mainly about frozen foods, are selling fresh stuff as well."

The big test, of course, will be how the big four respond to the challenges presented by the shake-up in the market. All the signs are that they will be looking to take the budget retailers head-on, with Morrisons committing to price cuts worth £1 billion over the next three years. Tesco has now been urged by one major investor to cut its margins to one per cent.

This would, of course be bad news for the shareholders, but good news for the consumer.

And while the big four might find be feeling the pinch, Mike Haynes says it is unlikely any of them will be vanishing any time soon.

"Tesco's market share falling from 31.8 per cent to 27.8 per cent might be seen as disastrous for Tesco, but in the same way that Manchester United might consider finishing sixth in the Premier League to be a disaster. It's still got nearly 28 per cent of the grocery market."

By Mark Andrews