Supermarkets luring customers with promises of price cuts

Supermarkets in the Netherlands are now trying to lure customers with the promise of lowering their prices after a year in which record-high inflation levels became a much-discussed theme. Experts call it a tough battle to win over consumers, but do not think it will lead to a price war like at the beginning of this century.

Supermarket chain Dirk van den Broek announced on Wednesday that it would reduce the price of hundreds of products and will not hike the prices of those items until at least the end of 2023. It will lower the prices of "everyday groceries," such as bread, coffee, dairy, and care products. A spokesperson said this is possible because the worst price increases for raw materials are now behind us.

Market leader Albert Heijn announced a day earlier that it would put more fresh fruit and vegetables on sale more frequently. Albert Heijn said this would be possible by responding more intelligently to the size of the harvest from local growers.

ING retail expert Dirk Mulder considered the announcements to be -in part- a marketing strategy involving "smart communication" after fierce criticism about the sharply increased prices that supermarkets charged consumers. "Actually, there is a constant battle between the industry on the one hand, which wants to pass on the higher costs, and the retailer on the other, who wants to keep the price as low as possible," he explained. "If you, as a retailer, can then demonstrate that you are passing on those cost increases as little as possible, that is good for the image."

But with price cuts, supermarkets are also hurting themselves, at the expense of the industry's already tight profit margins. "I certainly don't want to say that this is purely marketing; it will somewhat impact their margins. But that leaves the question of what is happening across the board. You can look at the prices of a shopping baskets with the most-sold products, but other things may go up in price that you also need to buy."

A price war in which supermarkets compete with price reductions on large parts of their range, as arose in the first decade of this century, is unlikely, according to Mulder. "In the short term, that only yields a little bit. But if the rest follow after one player, the consumer will return to their old supermarket. Then it will have cost a lot of margins and will have yielded little."

Retail and brand expert Paul Moers also said he finds such a price war unlikely. But he does see that there is "a tough" battle going on to retain customers and market share. "You see that everyone is busy with a cheap range of private label products. That is also an answer to the terribly expensive groceries," he said.

He also observed that supermarkets are increasingly looking critically at how they can reduce their own costs. He also suspects that is a reason that Jumbo took a critical look at the sponsorship agreements in cycling, speed skating, and Formula 1.