The vulnerability of the homewares market was exposed this week by Habitat and Homeform filing for administration and the collapsing profits of Carpetright.
Another retailer to hit the wall in recent times is Haldanes, which announced insolvency after just three years in the supermarket business.
However its demise does not reveal a fundamental weakness in the grocery market, instead it shows just how strong its competitors are but also how similar.
When one major supermarket launches a new initiative, such as phone apps, guild accredited training courses or revamps of own brands, a rival is never too far behind.
Haldanes believed it could establish itself as different to the norm but shoppers just compared it to other grocers and it came up short.
Leading supermarket chains are well-oiled machines which seem fairly insulated from much of the austerity seen elsewhere in the industry.
The grocery market grew by 2.5 per cent year-on-year in the four weeks to June 12th 2011 according to Kantar Worldpanel, whilst the British Retail Consortium (BRC) and KPMG found that overall retail sales were down 0.3 per cent in the month of May.
With money tight for most consumers, claims over price have become increasingly loud and things got a little ugly when Asda and Tesco reported each other to the Advertising Standards Authority over their respective price comparisons schemes.
Sam Hart, analyst at Charles Stanley, argues that this supposed price war is “phoney” however and that there is little difference between the costs of most goods at the two leading grocers.
“It is intensely competitive but rational in grocery right now, there is no price war. Its all about price perception, as you can’t really prove that any one leading supermarket is cheaper than the others.”
By continuingly to tell their customers that they have the cheapest goods, the grocers can maintain through trade, and though prices have been significantly rising and similar wherever you shop customers keep coming back.
As an influx of discounts has kept inflation for non-food goods modest, and summer fashion sales should push this down even further, food prices have been keeping up with overall inflation and grew 4.7 per cent in May according to BRC & Nielsen data.
Commodity and fuel costs are the biggest pressure on grocers right now, but margins at the top four have been kept healthy due to demand.
And despite tightened purse strings it is not just the cheapest supermarkets that have been doing well, although Lidl and Aldi have been swallowing up market share, Waitrose has been proving that value is still as important as price.
Independent industry consultant Jonathan Banks commented: “Customers know that products at Waitrose and Marks & Spencer may be as much as 20 per cent more expensive but they perceive them to be at least 20 per cent better than the comparable food of rivals.”
The only real challenge for UK supermarkets at present is how to keep on growing, particularly a business like Tesco where being the market leader counts against them in competition commission judgements.
Most identify non-food as the place to expand into but eager entrants into this sphere such as Morrisons should take heed of its rivals’ problems.
Jamie Talmage, analyst for BDO, said: “The big challenge all the supermarkets currently face is in non-food, where spending is more discretionary and vulnerable than food. Tesco in particular seems to have underperformed in this area.”
Asda has held its hands up to underperforming in this area, and Hart argues that the scale of its expansion in non-food led to a deterioration of its food offering.
Talmage continued: “Getting the ranges correct in non-food, and especially through online channels, is going to be a major growth driver going forward.
“I would expect to see more deals like Morrisons acquisition of Kiddicare in the future rather than any significant plays in grocery.”
One deal in the offing is the sale of Iceland which could prove attractive to the larger players in the industry, with smaller format stores fitting with many a convenience strategy.
Despite CEO Malcolm Walker’s insistence otherwise in an interview with Retail Gazette today, Hart believes the frozen food specialist will be broken up for scraps.
Hart concluded: “The overall operating environment remains benign and the major grocers will continue to increase their bottomline, reporting subdued but solid trading updates.”
That might not sound that exciting but it is a forecast many other retailers in the sector would love for themselves right now.