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What Aldi and Waitrose have in common

By Kate Holton and James Davey, Reuters

John Lewis and Aldi might be poles apart in price and image, but they emerged as possibly the only two shops to really prosper in 2012. In contrast there was misery for M&S, while Jessops barely staggered into 2013 before collapsing into insolvency.

Britain’s austerity Christmas meant few shops prospered. Those that did had a breadth of products, a range of customers and online presence allowing people to “click and collect” - or just really cheap prices.
John Lewis and Debenhams both lured record numbers of customers to their shops and websites, online sales soared where customers could collect in store and Aldi saw a huge spike as Brits chose price over brand.

"The star of the retail world has undoubtedly been John Lewis, their performance has been outstanding," said Neil Saunders, managing director at retail consultancy Conlumino.

"We've had an online and multi-channel Christmas, where those retailers who have offered great multi-channel solutions ... have done very well. And those who haven't have lost out."

Some retailers were also hampered by the fact that many Britons left it to the last weekend to do their shopping, in the hope major chains would buckle under the pressure and launch sales before Christmas.

One trader selling "I Love London" T-shirts on Oxford Street, central London's main shopping destination, said people were spending less. "There are no people, the whole year has been quiet".

Cheap makes for festive cheer

Among grocers, budget group Aldi stood out with growth of 30%, in contrast to previous years when shoppers saw the holiday season as an excuse to upgrade to a more expensive outlet.

The decision instead to stick with a shop that sells a bottle of sparkling wine for £3 and a meal for 89p was described by analysts as a reflection of the pressures on Britons from a lack of job security and a pay squeeze.

"Let's just say I tried to be more careful ... I think people are still spending, but they're being more choosy," said Veronica Pinney, 71, on Oxford Street.

For those who could afford to splash out, the upmarket John Lewis-owned Waitrose proved popular, outshining the performance of the so-called big four of Tesco, Asda, Sainsbury’s and Morrisons.

According to market research by Kantar Worldpanel, Sainsbury’s was the only big four grocer to win market share as cash-strapped shoppers honed in on its cheaper own-brand products, online offerings and local stores. Sales of its own-brand Prosecco, sold for as little as £6, leapt 15%.

Market-leader Tesco, a year on from a dismal Christmas that prompted its first profit warning in two decades, posted its strongest growth in three years as it showed the benefits of a £1 billion turnaround plan.

"In the UK I think we were back on form," said Chief Executive Philip Clarke. "[But] whilst our seasonal performance is encouraging, there is a lot more to do."

Not everyone was convinced.

"The expression 'one swallow doesn't make a summer' comes to mind," said one top 20 investor in Tesco, after seeing its results. "Have you been in a Tesco store recently and noticed a difference in the offering? Because I haven't."

Shoppers in east London generally agreed. Pete Smith, a health worker, said he avoided Tesco because it was "too busy, too packed and the staff aren't very helpful".

Still worse than last year in real terms

Even some of the better-performers flattered to deceive, once price rises were accounted for. Sainsbury reported like-for-like growth in its third quarter of 0.9%, while Tesco posted 1.8% in the six weeks to January 5. But with consumer price inflation running at 2.7% that still left both with lower sales than last year in real terms.

M&S saw third-quarter underlying sales of clothing, footwear and homewares fall a worse-than-expected 3.8%.

To compound matters, the update was rushed out late on Wednesday after being leaked to a broadcaster, leaving management to apologise in the face of questions over their competence.

Chief executive Marc Bolland told reporters he was confident steps being taken by a new general merchandise management team would address problems in the area.

[Related feature: Plenty of choice, all of it dreary: Where it all went wrong for M&S]

 (Additional reporting by Sinead Cruise, Sudip Kar-Gupta, Lorraine Turner and Arthur Fane; Editing by David Holmes & Yahoo! Finance)

[Source: Reuters]