Annelies: Asda and Tesco in £400m Christmas price war

Asda and Tesco in £400m Christmas price war
Within 6 weeks it’s Christmas. So it’s time to buy presents for family members and friends. Good news: the supermarkets Tesco and Asda in Great-Brittan have announced price reductions. It would be great if the supermarkets in Belgium would do the same.
Today my blog is about these two supermarkets who have a price-war. I find that this price-war is relevant for our corporate finance theme because it is about companies’ price reductions. However, supermarkets can’t continue to reduce their prices forever. Otherwise they will make severe losses and they will go bankrupt. Naturally, every company wants to make profit. Every year they have to draw up a budget. If they want to reduce their prices, they must consider if it is possible.

Summary
The price reductions of Asda for clients is £ 150 m worth. This year Asda will have the most aggressive price policy in a decade.

The companies clients can spread their costs of Christmas in a longer period with tailor made events and rollbacks on key items.

In the second quarter of 2009 Asda had a sales growth of 7.2%. The last three months there was a drop in sales up to 5.6%. This decrease is due to the declining food inflation.

Asda has already held various special events at its stores where customers could buy half-price toys, George clothing, or discounted music and video game products. Earlier this week the company also announced price cuts on 50 technology products, including a Philips Blu-ray DVD player for £97.

The other supermarket Tesco also announced that it was cutting the price of thousands of items around its stores, which it claims will save shoppers £250m. Tesco is offering an "essential turkey" for £6 and two frozen prawn rings for £5, as well as half-price offers on toys and bikes.
Retailer experts say that there will be more competition between the Big Four supermarkets in comparison to other years.

In Martin Lewis mind, the founder of Moneysavingexpert.com, the last week before Christmas will be the cheapest time to buy surprises.

My opinion

In my opinion it’s good that there are price reductions during Christmas time. Most people will buy presents, have a family diner, go on a trip with friends,... So most people spend a lot of money.

75 percent of all toys are sold in the last quarter of the year.
Christmas is an important time for everyone. There are a lot of poor people who can’t buy presents for their family because they don’t have enough money . Maybe when there are price reductions, they can buy something.

I think it’s nice to shop in Great Britain with these price reductions. The last week before Christmas is the cheapest time. So you know what you have to do: visit the UK shops. It’s a pity we have to study during this time.

Source: http://www.guardian.co.uk/business/2009/nov/12/asda-starts-christmas-price-war