Another reason why Tesco consider their competitors to be Asda and Sainsbury's and not Netto and Aldi is that the two supermarket groups aim their products at different people. Netto and Aldi are renowned for being 'Discount supermarkets'. The prices of their products are low because they aim them at the less wealthy people. In order to compete with the bigger supermarkets they would need to start selling high quality goods sop they could charge higher prices for them and make a larger profit. They would also need to start selling branded goods, this is because the majority of people prefer to buy branded goods because they fell that they are guaranteed high quality goods.
The bigger supermarkets are located in easy accessible, popular shopping areas and get a lot of people shopping there. They are accessible for most types of transport. Some of the smaller supermarkets do not have very big car parks and are not situated in very popular, upmarket areas. If they wanted to start competing with the bigger supermarkets then they would have to situate the supermarket in more popular 'richer' areas that has good access.
Aldi and Netto do not really have a good reputation for being high quality supermarkets unlike Tesco, Sainsbury's and Asda who all have reputations for being high-class supermarkets. In order to compete with these large supermarkets, Aldi and Netto need to gain a good reputation for being a high-class supermarket that sells high quality goods. They can do this by copying the changes that Tesco make to be as successful and get a good reputation like them.
Aldi uses European brands which aren’t very popular. I would suggest them to start selling popular branded goods because they are much more popular and people are familier with what they are purchasing. They will also to need to create a premium own brand range of goods in order to compete with the successful premium own brand ranges of the other, larger companies.
Tesco uses four different types of pricing, promotional pricing, consumer value pricing, going rate pricing and loss leading pricing. The large supermarkets use these pricing strategies cleverly to make a large profit. If the smaller supermarkets want to start competing with the larger supermarkets they will also have to use these pricing strategies effectively.
They will have to use promotional pricing to attract people to shop at the supermarket in the first place. If the special offers used, are well advertised then it would encourage people to use these offers and visit your supermarket. This princing stratergy will make people visit the supermarket in the first place.
I would suggest that the smaller supermarkets use the consumer value pricing stratergy on a premium range of goods or on high quality branded goods. This will allow them to charge high prices for the prestige goods, therefore make a large profit on them.
The large supermarkets use going rate pricing, this means that they are immediately competing with the other supermarkets with a certain type of product.
The large supermarkets use loss-leading pricing to make the customers look around the supermarket. The smaller companies should use this if they want to compete. The supermarket staff should put certain objects in popular places to make them buy them while they are buying the chosen cheap product. The large supermarkets use this effectivaly.
The larger companies have extra facilities (that you have to pay to use) in the supermarkets to gain extra profit. They have things like café's and newsagents to make extra money on top of the money made inside the main store.