Brand Trust | Cost of living crisis | Josh Brinkers
Earlier this month Lib Dem leader Ed Davey called on the CMA to investigate supermarkets, accusing them of profiteering as costs at the checkout soar. It’s an interesting accusation since there isn’t a huge amount of evidence to back it up; supermarkets have candidly explained supplier costs are up across most categories, and their latest profits (while still substantial) are down on previous years. It’s well-known that supermarkets operate on lean margins with price-matching being constantly leveraged to discourage switching, so it’s inevitable that prices will have to go up as suppliers charge more. Afterall, despite their importance to the UK’s food supply, supermarkets aren’t charities.
For the most part, consumers appreciate the position supermarkets find themselves in. At Market Measures we’ve been tracking trust in different industries when it comes to passing price increases and decreases on to customers, and there is more faith in businesses like supermarkets than petrol forecourts and utility suppliers to act honestly.
On the face of it, these results aren’t surprising. Fuel and energy giants, with their trade in unsustainable resources and regular involvement in world events, already have a PR problem. This feeds a base level of distrust among consumers – one that’s only amplified when you’re standing in front of the pumps watching the cost of your tank of fuel hit silly numbers, confident that you just read the price of oil dropped again last week.
This distrust is not unfounded – fuel companies especially are regularly accused of profiteering, and it’s easy to see why. In the first five months of 2019, UK forecourt prices on diesel were 34.6% more expensive than wholesale. As you’ll probably recall, the next few years were filled with Covid, a couple of runs on fuel and a war in Ukraine, all of which caused wholesale and forecourt prices to fluctuate regularly. However, since 2019 the price at the pump has grown significantly more than the cost of the fuel – in the first five months of 2023 forecourt prices were 52.4% over wholesale. Pretty hard to justify, especially with several oil firms reporting record profits at a time when many feel they’re struggling.
When it comes to building trust, one of the biggest issues fuel and energy companies have is their fundamentally transparent nature. The costs of their inputs (natural gas, oil, taxes etc) and outputs (forecourt prices, energy bills etc) are all readily available, and anyone who keeps an eye on the news will have a decent idea on what makes them fluctuate. It’s this visibility that allows regular consumers to spot things that don’t add up. There isn’t much need for consumer watchdogs when the average person can witness the costs of oil and petrol drifting apart, or watch how reactive forecourts are to oil prices going up and how quietly they ignore them going down.
While this level of transparency hasn’t done public faith in oil companies any favours, it does have enormous potential to build trust instead. If consumers can see a business is doing everything it reasonably can to keep costs manageable, affinity is a given.
Returning to the case of supermarkets, the range of their offer makes it hard for regular consumers to keep an eye on supplier costs, so it can be easy to jump to an accusation of price gouging when all you see is prices going up (whether it’s true or not). However, this same scenario has the potential to play out across any business with a complex supply chain, from pubs to restaurants to clothing manufacturers.
That’s why it’s up to companies to demonstrate they’re doing the right thing by their customers – if consumers can see some businesses don’t play fair, they might start assuming others don’t either.