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ASDA/Wal-Mart And Tesco Price Wars Portend Future Of Having To Take Sides

Jim Prevor’s Perishable Pundit, July 24, 2007

There is a big battle in the UK between ASDA and Tesco due to a Tesco ad campaign claiming the lowest prices:

ASDA KICKS OFF WAR OF WORDS WITH TESCO

Supermarket attacks rival’s price comparison ads and accuses its sales of ‘stalling’

Retail colossus Asda has taken a swipe at Tesco’s aggressive range of Price Check ads — insisting that the retailer is on the offensive in order to cover up poor sales.

Tesco has been on the front foot for the last few weeks, with a comprehensive cross-media blitz suggesting that it has the upper hand on price compared to rivals Asda, Sainsbury’s and Morrisons through its online Price Check service.

But at Asda’s music, video and games conference in Leeds this week, business unit director Mike Snell told a crowd of entertainment suppliers: “It’s no accident Tesco has been attacking Asda on price — their sales are stalling.”

Snell also pledged to improve Asda’s supply chain and its in-store offering, while issuing a stark ultimatum: “We will only back those who back us.”

He added: “That’s not meant to be a threat. You have got to decide whether we are the right partners for you. If you want to work with us, you’ve got to do it now.”

To us, whatever the reality of who is less expensive in the U.K., the business unit director’s comments, “We will only back those who back us,”portends what is likely to happen in the U.S. if Tesco’s operations take off. There will be increasing pressure by both Tesco and Wal-Mart to make suppliers choose which company they wish to work with.

Part of the issue is confidentiality — how can these companies “partner” with suppliers working with their blood enemy? Part of the issue is getting product. If a supplier is short or has a special offer to make, its retail partner will want it all.

And part of it is looking for suppliers with razor-sharp focus. They don’t want vendors to build a centrally located warehouse; they want warehouses built convenient to serve them.

The business will never be the same once these two begin a real battle.

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