Drawn & quartered

Every quarter the UK retail market share figures make stimulating reading...winners, loses... but what are you meant to do with it?

Last week's Kantar Worldpanel trumpeted the huge news: Lidl is now the number seven grocery retailer in the UK.

What I found just as interesting was what's not being more clearly called out: inflation & store numbers

Hurrah! Inflation is driving top-line. So it should. The problem is, if you are not tracking ahead of inflation, you are still declining - and the big 4 are struggling and will largely continue to do so.

Tesco showing like for like growth should surprise no one. They have been rationalising their store base, so those staying open will see a natural rise in traffic as shoppers go to their next nearest Tesco.

If the Booker deal doesn't proceed. What then? If it does, Tesco will find themselves focused on store and supply chain optimisation and there are real risks of loss of short-term focus on the core as management time deals with structural property issues

Asda are stymied. The have the wrong store footprint for 2017 and beyond. They know it - but it's hard to see what they can do about it. They have over 600 stores, but for how long? They will need to find bottom line efficiencies to compensate for real terms top-line stagnation

JS are also in a bind, their NISA bid looks decidedly less tasty after the Morrisons/McColls coup and is already and unsurprisingly rumoured to be on hold. They have to hope the Argos move really delivers.

So of the four, only Morrisons seem to have their act together at the moment, but even then the McColls deal is not a slam-dunk and will have to deliver value. It buys Morrisons time, maybe two or three years as the deal expands their effective store base

The real inflation-busting action is happening in Lidl and Aldi who together notched up total market share gain of 1.3% points. And they are achieving this off a still-developing store base and c. 2000 SKUs many of which are confined labels

These factors are the killers. The limited range has a very limited impact on the number of items per trip shoppers buy, but they have a massive impact on system efficiencies and price. And will continue so to do. The more stores they open, the more winning they will do.

So here's a thought, when you see the quarterly share data, take half and hour and think about your business and retail customer investment choices moving forwards and consider what insights might be drawn

• Do the inflation check - who is winning, really
• Make sure you are modelling each chains store numbers and development plans into your thinking - where will each chain be in 1, 3 and 5 years - and what share will they have?
• If you aren't learning how to win with Aldi and Lidl, you are already losing
• If you are a food business - make sure you have a credible out of home strategy
• And I didn't even get to Amazon yet

Morrisons: The safer way than Safeway

Morrison's capturing the McColl's supply contract is audacious. The decision to execute using the Safeway brand is not unproblematic.

Why so?

The continued expansion of Aldi & Lidl across the UK; JS's moves to acquire NISA and Tesco's drawn out deal to bank Booker means the battle for proximity store dominance is fully engaged and price competitiveness is crucial.

It is likely that most Safeway SKUs created will have an existing Morrison's counterpart and will be produced on the same lines. But this means more complexity for the factories to manage, more packaging, higher inventories of finished stocks, interrupted runs, more waste and overall impaired economics. This is unhelpful to McColl's; it could be damaging to Morrisons. Running with the existing Morrison's portfolio conversely would bring efficiency benefits to both.

Remembering Safeway?

Safeway is an old aunt who died some time ago. She wasn't anyone's favourite aunt and if truth were told, she had developed a rather unusual and not necessarily pleasant aroma over her last few years. Safeway disappeared in 2004 having seen customers flee away and then savaging itself with a programme of deep branded price cuts that proved self destructive. I dare anyone to name a signature Safeway SKU that they fondly recall or whose absence has been missed. Anyone making the "residual fondness" claim is either trying to post-rationalise or is seriously misguided.

A blow to Sainsbury & Asda

Whether this is a first step to a full acquisition of McColl's by Morrisons will have to be seen but overnight Morrison's have secured a serious grip on the UK proximity retail market. The deal blows a huge hole in JS's plans to acquire NISA. The value in that idea seems dead in the water. And it exposes Asda to the challenge of why they didn't see this play and make a move: as their sales continue to dip, there is no obvious path forward.

More reasons to drive with Morrisons

One can see the headline attraction of using the Safeway brand. Words like uniqueness and point of difference come to mind. And certainly one can make the case that it carries greater residual heritage than NISA's Heritage label. A less emotional view might have stressed the shared economic benefits of leveraging the Morrisons brand across the McColl's estate. Safeway may be nicer than NISA; but Morrisons is the safer way.

Shopper Loyalty Part 3: The end of Clubcard?

Will Tesco axe Clubcard? I know, it is an absurd suggestion. Having spent twenty years building a veritable industry of activity around it, how could Tesco possibly abandon its golden child? Unthinkable.

Yesterday, Morrisons 
announced £1billion of price cuts over the next three years focused on basic products. Their message: the gap between mainstream retail and discounters is too great and must be closed to stem the loss customers: downplay like for like sales, focus on volumes.  Shoppers want value today, delivered with simplicity and are prepared to leave Morrisons to find it elsewhere.

Assuming these price cuts are for real, Tesco will have to respond, but how? Where can they find savings to fund continued price investments? A clue to the answer may lie in Canada, where earlier this week Safeway abandoned its loyalty card. 

According to Jim Tierney on Loyalty360:

"As of April 4, Safeway Canada eliminated the store’s actual loyalty card and extended the program savings to anyone, regardless of whether they were members of the program..Spokesperson John Graham said "Discounted items—an average of 4,500 per week—will now be available to all customers......We introduced card-free savings at Safeway, the intent is to offer everyone the lowest prices every day with no more card. The ability to carry one less card is seen as a greater convenience for our customers. A large percentage of our shoppers had used the club card. It’s been a fundamental part of the way we offer savings.” Graham said the initial early feedback has been very positive among customers. “The research and feedback we had over the years showed that some customers had a preference for not requiring a card”

Unthinkable? But then we live in strange times and thinking the unthinkable is not as dumb as it sounds. Don't be surprised if you hear: "One less card, one thousand lower prices. Every little helps: that's Tesco" 

The Quick and the Dead: Asda swings the axe

 You know the old joke about two people who encounter a lion. The first guy starts running and his friend shouts "you'll never out run the lion" only to have hear the furst guy call back "i know, but i can out run you!"....


Well, there are two types of retailer left today: The Quick and the Dead. Having identified the challenges facing Morrisons and Tesco, the news today (The Times, March 24th)  from Leeds is that following a McKinsey review, there is a big shake up coming and up to 200 senior jobs will go.

In the face of industry turbulence and the impact of on-line competition, bricks and mortar retailers need to structurally rethink their cost model and leverage data and technology to deliver simpler, better, faster, cheaper for shoppers. Heads at the centre bad, hands in stores good!

This is going to push more work and cost towards suppliers - and they will have to adopt similar mantras to survive the financial repercussions.

Enter Virtual Reality. The opportunities to leverage ground breaking technologies to reset the clock on retail planning and operating time, costs and resource is here. The retailer who drives this technological advantage farthest, soonest, will have significant cost advantages.

It may not be possible to out-run the on-line lions forever, but there's a lot of room for survival - you just have to be quicker and smarter than your competition.

Retail Revolution: "Shoppers of the world unite, you have nothing to lose but your (retail) chains".

The UK retail industry is in turmoil. With problems at Morrisons and the Coop threatening their survival; Phil Clarke's speech at retail week seeking to make a virtue of freneticism. Change is in the air; a retail revolution even

The revolution is structural, multi-dimensional and polarised. It's not just mobile internet access transforming the way we "search and purch". There is a revolutionary dynamic stretching across Amazon, Groupon, Aldi right through to Poundland and Boohoo.com. Not forgetting B&M coming to market soon with Sir Terry Leahy on board. Discounting is front and centre

Talking of revolutions, last week marked the 127th anniversary of Karl Marx' death. Some of his ideas illuminate the challenges facing established retailers facing the discount onslaught. No really, they do.


Marx saw economics as the prime mover of change.  As economic power disperses, the dominant forces (thesis) are challenged by new participants (antithesis) and the outcome of the clash would be a new, higher order economic status quo (synthesis), with communism the end of history.  Historical Materialism 101, got it?

Successful discounters are anti-establishment value re-setters and all about economics. They combine high quality with unmatched value chains. Whether it was M&S putting shirts and shorts on Britain's backs and bums (by building direct relationships with suppliers and cutting out wholesalers); Jack Cohen's "pile it high, sell it cheap" mantra in 1960s Tesco or Walmart's EDLP philosophy: these were all discounting models. Their success put a good many competitors out of business, creating a new retail establishment.

Discounters also thrive on the structural disadvantage others impose on themselves. In mass retail focus and simplicity are the partners of unmatched value chains.

When advantage is lost, death is inevitable. Kwiksave UK built a business selling a limited number of major branded SKUs, from small basic outlets at cut prices sustained on one advantage: centralised distribution. While Tesco, Sainsbury and Asda were still had suppliers making minimum drops to individual outlets,  Kwiksave were securing full-truck efficiencies, within a lower cost model and passing the savings on.  Once everyone else could match them, all Kwiksave had left were small untidy stores, a limited range of brands and no price advantage. Game over.

Retail value resetting has severe ramifications. The centralised distribution revolution, the first big data enabled shift, saw suppliers remove sales force organisations and focus on national accounts, outsourcing merchandising services to field force agencies. Expect the impact this time to be no less profound, with services like category management being outsourced to specialist providers.

Karl's theories were always more appealing than his solutions. It's probably why ordinary people connected with Marks & Spencer ahead of Marx & Engels. He was wrong about communism and never foresaw consumerism. If he had, he might have reworked his manifesto, urging: "Shoppers of the world unite, you have nothing to lose but your (retail) chains".  He shouldn't be discounted.

Morrisons fights back - but is it a safe way?

The gloves are off. Morrisons have declared war on Aldi and Lidl sees the race to the bottom takes another sharp fall with £500m of property sales to fund price cuts. It is hard to see how Morrisons wins this battle in the long term. Using property cash to shore up market share is a short-term strategy with any victory, pyrrhic. What happens when the money is spent? Aldi will still be there, still opening new stores. And Morrisons?

History does not always repeat itself, but there are looming shades of Safeway’s last fight. Seeking to stem a loss of customers to Tesco, Safeway invested in hard-hitting promotions. It wasn’t sustainable – and in 2005, Morrisons picked up a Southern store base, thank you very much!. 

Fast-forward 9 years. The Sunday Times (March 9th 2014) reported Sir Ken Morrison as being “apopleptic” with the current performance of the business; one can only imagine how he would feel if the retail name he spent his life building faced the real prospect of disappearing from the high street. 

If there is any fall out, a troubled Morrisons, with a diminished property portfolio, might let Sainsbury move in, move north and get mightily close to matching Tesco’s leadership position. Morrisons misery may catalyse Coupe’s coup. Ding Ding..Round 1.