Supermarket Sweep begins as Morrisons tries to play catch-up

Morrisons like for like sales dropped by 2.5% over the festive period Photo: Sean Dempsey/PA Wire

It is a bit like supermarket sweep this week with all the big chains reporting their Christmas sales. It is a vital time of year for our biggest retailers, who are also some of our biggest employers.

Morrisons is first to report this morning and likely to be the worst performer. Their sales are down 2.5% compared with last year and they admit that the "disappointing performance" is not just down to the climate, although that is a factor.

The boss concedes Morrisons' own decisions in the past have left them playing catch-up.

They are behind their competitors in online shopping and introducing smaller stores like Sainsbury's Local, or Tesco Express.

Morrisons is trying to address this, but a slow response to the rapidly changing market has hit their bottom line.

Sainsburys and Tesco's have both diversified into smaller more local stores Credit: Katie Collins/PA

Morrisons insist the business is still strong - they still employ the equivalent of a small town with 140,000 staff and turnover millions every week. But even if they manage to level with their competitors in the next couple of years, all of the big players may find it harder and harder to fill the tills.

Supermarkets are able to make big economies of scale with the enormous stores we got used to seeing in the last decade. They are falling out of favour and smaller shops lose that cost advantage of scale.

Tesco has moved quickly to expand online Credit: Rui Vieira/PA

And while businesses who have focused early on online have been able to grab customers, customers who require individual deliveries to their door from refrigerated vans are more expensive to service than those who get the bus or drive themselves to a store.

This has always been a tough market but even aside from the performance of the economy, nothing suggests it will get any easier.