How do supermarkets compete?

In the previous post I wrote up the results of the Electricity Authority's latest survey of competition in various industries: supermarkets came out tops in terms of people's assessment of whether they are getting a competitive deal from businesses they deal with. While it wasn't a full economy-wide survey, and maybe there are unsurveyed sectors that would have shown up better than the supermarkets, it was nonetheless very interesting that people feel they are getting a fair deal from supermarkets vying for their custom, and all the more so because there have been concerns about a potential duopolistic shakedown.

As it happens, I just came across another new survey which tells us in more detail what people value from supermarkets (it's Australian, but I'd suggest it's equally applicable here). It comes from Roy Morgan Research's 'Single Source' surveys, which are very large scale: this supermarket one had close to 16,000 respondents, all interviewed face to face. The press release is here (the full thing costs serious $, which is fair enough given the scale and value of the exercise).

Here's the core result, where we can see the various dimensions across which supermarkets compete, and which ones most press consumers' buttons.

Before seeing these results, I'd have guessed that some dimension of all-in-one convenience would have topped the list, supermarkets being (you'd think) the classic economies of scope/minimise transactions cost model, but I'd have been wrong. There are, to be sure, some convenience dimensions in the most valued characteristics of a supermarket. And there are some price/value dimensions, too, which you'd also expect to be high up the list. But the surprise packet - for me - was the very high ranking of quality, with 'high standards of food safety', 'hygienically prepared food', 'good quality' fruit and veg and 'clean and tidy' taking four of the top nine spots, including the top one itself.

Apart from its intrinsic interest, and the insight it gives into the real nature of the supermarkets' value proposition (and, I'd guess, a glimpse of their likely strategic thinking), it's a good reminder that competition is more than competition on price. Sure, most of us involved in thinking about competition have taken the idea on board, most of the time, and there's even an acronym SPQR (Service, Price, Quality, Range) that people sometimes deploy to make sure they've got all the potential bases of competitive rivalry covered. But it's nonetheless easy to lapse into using price as a proxy for everything. In some lines of business, and supermarkets are clearly one, that could lead you badly astray, and in several directions. You could easily assume there is less competition that there actually is. And, if rivalry diminished on one of those non-price dimensions, you could easily miss that, too.