James Moore: Lidl luxuries are drawing in those 'squeezed middle' shoppers

 

Outlook Britain's so-called squeezed middle has found a solution to Ed Miliband's cost of living crisis. It's called Aldi – or Lidl.

The discounters might not offer the range of the big four supermarkets, but people who go there often find they are pleasantly surprised by the quality of what is on offer.

Inflation might have finally fallen to the level of the Bank of England's 2 per cent target (you could hear the sighs of relief in Threadneedle Street from miles away) but that's still ahead of most wage settlements. So it's no wonder that the number of discount shoppers is growing.

Why pay more when you don't need to? The discounters have even managed to offer posh wine and other luxuries on the cheap.

It's working a treat. This can be seen in the fact that, of the big four British supermarkets, only Sainsbury's managed to maintain its market share over Christmas. It's going to get back its position as the number two supermarket chain by standing still.

Interestingly, the top end of the market is doing quite nicely thank you very much, as the performance of Waitrose and Marks & Spencer's Food amply demonstrates.

Those for whom money isn't a problem like to show it by shopping at these places. Others are finding there are benefits of mixing it up a bit, using the discounters for the basics while making sure the Waitrose label is prominently displayed on the dinner-party cheese. It doesn't hurt that customer service isn't an entirely alien concept there.

Meanwhile, the big four are finding that they are becoming a squeezed middle.

Sainsbury's may feel (with some justification) that's its current strategy doesn't need much of a change to cope with this, while Asda, with Walmart's muscle behind it, could try taking on their discounters at their own game (although its stores can be horrible).

As for Morrisons, if its online offering isn't a hit, a takeover bid could follow. Keep an eye on those shares.

And Tesco? Saddled with its antiseptic and unfriendly aircraft hangars, it seems to think that the answer to the challenge of the discounters is to open a convenience store every hundreds metres or so, à la Costa Coffee. It's a good thing the competition authorities appear to have other concerns.

Tesco has already crimped shareholders' returns by pouring cash into sprucing up its staff and stores. But that may not be enough. Its shareholders may just have to accept a cut price offering from now on.

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