The collapse of WeWork’s plan for a $47 billion IPO has produced lots of wise analysis on how these big-money deals distort markets and penalise people who actually make things. However, the same forces are still at work in the convenience market and retail owners cannot afford to sit still.
Every week produces new announcements about how the world is changing. For local shops, a big number to think about is this: loyal customers in the US pre-load $1.6 billion on Starbucks cards. As blogger JP Koning observes, the coffee chain makes a $150 million profit on this each year because customers forget to use their balances.
Why this matters
Many local retailers will have run or will know of the practice of running Christmas clubs for their shoppers, where people put aside money every week to save for their big seasonal shop. While this was attractive to regular shoppers who trusted their local store because it was brick and mortar, today’s shoppers are increasingly comfortable spending electronic cash on their mobile phones.
For example, two years ago Mike Donovan set up Brushbox. It sells bamboo toothbrushes to subscribers. Check out its website here and think about why your shoppers might sign up.
What is the response of the big players in your industry? Let’s look at Sainsbury’s big new strategic initiatives announced last month (Note: not all qualify as new).
Integrating your store with Alexa
It is a sunny day and you are a shopper at home who is thinking about what to do. “Hey Google, I’m having a barbeque,” you say. “What shall I do?” In the world that Clo Moriarty, the chief digital officer at Sainsbury’s, is creating, the digital home assistant will recommend burgers and so on from the supermarket. Plus an umbrella in case it rains.
This is a big promise. She aims to provide shoppers doing a “near me” search on Google with the types of meat available and to then prompt them with a choice of wine. At the same time, she hopes to be able to display 500 or more recommendations from shoppers like you.
The ability to be able to see where a product is located in a large business like Sainsbury could be truly ground-breaking. But on its own, this is not enough.
Shoppers remain price-obsessed
No matter the excitement of the new, when Sainsbury’s is pitching to its investors it leads on price. The company says it has narrowed the differential between itself and the discounters, with lower prices on 120 big selling lines, rising to 200. Some of this is paid for by better supply chain practices. Otherwise, it is the cost of staying in business.
To make this work, it has to be ruthless on ranges. It claims to have improved its cash margin by 3.5% by reducing the number of lines it stocks. In part, shoppers’ appetite for new products is covered by its Future Brands initiative, introducing niche lines with consumer appeal.
In place of big 10 year refits, it is moving to a programme of little and often refreshes to improve the shopping experience. Around a quarter of its c-stores will see investment. In supermarkets, there is more room for cafes, food-to-go and concessions.
Own brand focus
Closer to the independent retail owner was the announcement by Ken Towle, chief executive of Nisa, that in the first year of its ownership by the Co-op own brand sales had risen by a factor of three, now accounting for 20% of volume sales to member stores.
Own-brand has helped our partners grow, he told Talking Retail. With hindsight, it seems a sensible strategy from the Co-op to win the loyalty of Nisa retailers as its brand is visible to consumers and trusted. Towle says 100 of its partners either have invested or will invest in refits this year to improve their chilled offer and “kerb appeal”.
Does this make sense? While he says the market is flat, better stores appear to do better. This is something that Sainsbury’s agrees with. It expects to generate £120 million in extra profit with 100 new c-store openings in the next five years.
On technology, the Co-op after a 12-month trial has just launched an app for its members. It hopes this will increase the frequency of shopping trips as digital vouchers may be easier to manage than paper ones.
Your watching brief
Data underpins everything. Great new digital experiences won’t win shoppers if your pricing is not right. Stocking the wrong products ties up money and costs margin. Own brands are a key part of the mix.
If you are interested in JP Koning’s findings, read his blog here.