As inflation is roaring through the UK economy, Tesco has made an effort to keep prices stable even if it takes a margin hit. Can this strategy work? In today’s Insight Flash, we dig into what changes in basket size indicate about Tesco’s positioning and track whether shoppers are responding to the tactic.
Pre-pandemic, the average ticket at Tesco was in line with the Grocers subindustry average. As lockdowns moved shoppers to consolidate trips, Tesco’s average transaction size increased faster than the subindustry as a whole, and has remained larger since. These larger transactions may give the company more scale, allowing it to find efficiencies as shoppers stock up.
Although in general the average transaction size is higher at Tesco than for the subindustry, it does have a larger percentage of transactions at low price points than key competitors. Over the last three months, 63% of Tesco transactions were in the £0-20 range versus 47% for low-price competitor Aldi. This implies that a lower price point may lead to more stock up and allow Tesco to increase its basket size.
Tesco has been doing something right. Over the last year, as shoppers have braved stores again, the company has seen a rise in the number of shoppers visiting each month that has far outpaced the overall Grocers subindustry (though granted on tougher y/y declines the prior year). January found 12.5% more individuals shopping at Tesco than the year prior, with 9.6% more in February and 5.3% more in March. This is compared to 4.0% subindustry growth in January, 3.1% in February, and 1.4% in March.