19 May Waitrose or Lidl?
Just in case you missed this morning’s announcement, Tesco’s profits are down for the second year running, this year by 6%. Contrary to this trend, Waitrose and Lidl have had an increase in profits. In general the “big four” have all lost market share in the first quarter of 2014.
So, the premium supermarket is doing well, the discounter is doing really well and the middle ground is struggling.
Know your product and know your customer. The middle ground is a hard place to be. Are you competing on price and selling it cheap with a no frills service, or are you charging a premium and justifying it with your great customer service and clinical skills? The most dangerous place to be is if you are trying to sell cheap and also promoting that you offer a great service, what market are you really in?
And the response from Tesco’s CEO, that it’s “impossible” to win against stores like Lidl and Aldi but that they are trying to get close to them on price combined with the “most compelling” offer for their customers. Huh? That looks like being stuck somewhere in the middle ground to me. All that happens here is that you end up with a moderate price for a moderate product or service.
I have always been critical of the big four. Remember the Morrison’s advert from a few seasons ago? Celebrities strolling in to a pseudo market street, brushing the snow of their fur collars to the tune of “Let it Shine” and getting a cheeky wink from the “fishmonger” who is showing his wares like he had been out and made the catch himself that very morning (great service) but at the same time they were promoting cheap prices. This puts them in the middle ground. Meanwhile the discounters are saying, “Look at us, the actual product is as good but we do it cheaply” without even talking about their position on service.
The difficulty is that Veterinary Practice is NOT a retail store – well not entirely. The above theory works well in a COMMODITY Market. The food range is essentially the same in Lidl as in Waitrose. It’s the Service and Packaging that differentiates the two.
Part of our business (about 40%) are the products we sell – drugs, food and pet products are a retail business and therefore commodity items – it’s the same drug or food weather we get it from you or the internet. If you have the purchasing power (i.e. corporates) you can purchase far cheaper and sell it at a reasonable margin because you have a larger market and the theory holds well. Low cost to practice = low price to punter. And when margins are cut you sell more ( i.e. work harder) to make up for it.
With a commodity PRICE is the ONLY differentiator.
Unfortunately there are those out there that would like to commoditise the whole of the veterinary market and have succeeded to a degree with vaccines, neutering and preventative health care. We even see procedures such as TPLOs and CT Scans up at competitive prices…
If our profession is commoditised then the cheapest provider wins – guess who that will be?
Fortunately the rest of our business is pure Service – a Customer EXPERIENCE…. And this is expensive to deliver consistently. Quality veterinary medicine and surgery requires quality and therefore expensive staff, equipment, training and resources. It’s a rule of nature – Cut back on these and you cut back on quality. It is a given in my book – there is no such thing as CHEAP veterinary medicine. By default it has to be a Premium Service (if we have any self-esteem as veterinary practitioners at all or we want to work ourselves to an early grave).
As independents we will lose the commodity war for many of our products and some of our services to the internet, corporate and high street providers.
That will leave us with the choice to compete with them in the mass market (good luck to that one!) OR we move our services to the Premium end of the market. The Waitrose model is about quality staff, training and engagement; top quality products; knowing your customer and delivering awesome customer experience.
There are clear lessons to be learned including that you might want to avoid the middle ground…but are you going to be Waitrose or Lidl?