IT'S a buyers' market out there - or so we are being led to believe, writes Zahra Borno.

Careful shoppers can cash in on the price war raging between the superstore chains and get by on an extremely low budget.

With tempting special offers, such as sliced white loaves for as little as 15p in some stores and cans of baked beans costing less than 10p each, there are plenty of bargains to be found.

Research by the Office for National Statistics shows that average food prices have been falling since August last year and are currently two per cent below those of 1999. Tesco and Asda have just announced the latest round in a price war which they say will slash millions of pounds off our shopping bills. It all sounds too good to be true but the superstore bosses are not just cutting the prices for our health.

Given the current climate, the battle for a shopper's loyalty has become cut-throat. It's a competitive market and the fad of loyalty cards was not merely introduced as a gimmick. Stores use them to gather vital information so they can learn about shoppers' habits and the sort of service they must offer if they want to make them regular customers.

Asda, which has a store at Wheatley, has just announced the latest stage in its cost-cutting strategy just six months since being bought out by the American company Wal-Mart last summer in a £6.7bn deal. By being part of such a big organisation it can flex its financial muscles and pass on savings to shoppers thereby buying their loyalty.

The store's Rollback price strategy aims to slash the prices of 6,000 every-day items before the end of the year. When the deal first went ahead nobody knew what exactly it would mean on the shop floor. There were the usual fears that jobs would be lost and stores would close. But in reality, little has changed for the shopper.

Asda has kept its name and has not be renamed Wal-Mart. Asda has always had an American-style atmosphere, even before the take-over, with cloying greeters welcoming shoppers to the store. The stores have always lacked the sophistication of a Sainsbury's store, with its Delia Smith overtones. And though Asda may not have been as basic in its approach as the now sadly-departed KwikSave, its emphasis has always been placed on being cheap and cheerful. Asda spokesman Colette Blanchfield says: "We are bringing prices down following our merger with Wal-Mart.

"The appearance of our stores will not change massively under Wal-Mart because, in actual fact, we are very similar.

"Where customers will notice a difference is on price. We have committed ourselves to bring food prices down to US levels wherever we can and that is where shoppers will notice the difference."

The changes on the shop floor may be limited but behind the scenes a technological revolution is taking place. Wal-Mart has invested millions of pounds in highly sophisticated digital equipment which monitors what goes into every shopping trolley in its Asda stores. It aims to keep abreast of what customers want and expect from their stores.

And stringent research and the development of sophisticated customer profiles also plays a key role in the battle.

Figures from the Institute of Grocery Distribution show that Asda has only nine per cent of the superstore market, compared to Tesco's massive 15.5 per cent. Tesco, which has about a dozen stores in Oxfordshire, is working hard to not only consolidate, but expand its slice of the market and is aiming to lure Asda's loyal customers with the launch of its latest round of price cuts. The firm is slicing up to £66m off 1,000 lines, cutting prices by between nine and 20 per cent.

The price war will inevitably leave some stores out in the cold. Last year's bread wars, which saw prices plummet to as little as 7p a loaf, drove some independent bakers out of business. And Sainsbury's will now inevitably have to retaliate in some way to Asda and Tesco's cost-cutting strategies if it is to retain its 12 per cent share of the market.

On paper it looks as if the shopper cannot fail to be the winner given the current climate. Whether that is true or not remains to be seen.

Story date: Friday 25 February

Converted for the new archive on 30 June 2000. Some images and formatting may have been lost in the conversion.