Tesco.com - Competition Commission

Low prices everywhere

Between 2000 and 2006 Tesco prices fell by 17%

Customers deserve the best value for money. That is why we work hard to find ways of keeping our prices down. This has helped us cut our prices by 17% between 2000 and 2006, in real terms, and in our aim to be ‘the best value retailer’.

This price deflation comes at a time when many other aspects of consumers’ lives – gas and electricity bills, motoring etc. have become more expensive. We, like others, currently face a tough challenge due to rising energy prices, but last year we still managed to reduce our prices by 1.8 per cent. We strive constantly to improve efficiency, and work with our supply base to achieve the best prices. Innovations such as our reusable plastic trays, which we use in our fresh food areas have helped us to make savings – these savings we pass on to customers. We also regularly check our competitors’ prices across a basket of 23,000 grocery and non-food products. Everyone can see the grocery prices for matching items on our price check website. That is how we continue, year in year out, to deliver low prices everywhere.

Our 17% fall in prices has gone a long way to contribute towards an overall fall in food prices. According to the OFT these fell in real terms by 7.3% between January 2000 and December 2005. Consumers have benefited from this strong downward trend in real food prices and intense competitive rivalry among food retailers has played a significant part in this.

Trend in real food prices since 2000

Whilst lower prices benefit all consumers they are especially important to families on a budget and have made a significant contribution to making healthy food accessible to all. We do more by running promotions on fresh fruit and vegetables. We now sell 95 fresh fruit and vegetable Value lines and we are also working with the Pre-School Learning Alliance to help parents and children in some of the UK’s most deprived areas make healthier choices.

Fair prices

We understand that customers want low prices, but they also want fair prices. That is why we charge the same prices up and down the country. We sell our products on the basis of a national price list available for all to see on our website. Even in the few locations that are unable to support more than one supermarket, where we are ‘the only supermarket in a town’, we continue to operate on the basis of our national price list.

Prices in smaller stores

Our prices are a little higher in some of our town centre and neighbourhood stores because costs are higher there. Stores in town centres are typically smaller and have higher overhead costs (mainly rents and rates) per square foot of selling space than those outside the centre. Higher overhead costs are spread over a smaller volume of sales, and can only be recouped by charging prices that are, on average, higher (prices are on average 2-3% higher in our Express stores and in a few of our Metro stores than in our larger stores on the edge or outside town centres). We believe it would be unfair to use our big stores to subsidise the prices in our smaller stores, so we don’t do it. This way everyone gets a fair deal.

What our customers think*

• "I'm aware that Tesco often compares prices of competitors so this gives me confidence to buy" Eastleigh

• "I get value for money at Tesco which is more important than cheap" Portobello Metro

• "The store feels a bit more upmarket somehow [following the Refresh] – there's a good balance of products and prices to suit everyone." Guildford

• "I am very pleased with Tesco. It sells high quality food at good prices." Carmarthen

• "I think Tesco have moved more upmarket, but they still give good value for money" Eastbourne Metro

*Comments taken from Tesco Customer Question Time research in stores