Waitrose set to challenge in the UK grocery sector

With half-year sales of £2.18bn, up 7.4% and profits up more than 20% at £128m, Waitrose is a retail brand on the move. The company has come a long way in a short space of time, only last year it was tipped to become a victim of the credit crunch due to its premium positioning.

The successful launch of the Essentials range – now accounting for 16% sales – has made the brand more accessible, Mark Price, MD of Waitrose says, “We’re seeing weekly sales growth of 11%”.

Waitrose convenience store Nottingham

Geographical spread

With the brand achieving new relevance with consumers, Waitrose plans to expand its base out of the southeast by developing new sales channels.

Despite high growth, poor geographical coverage is hampering the brands ambition, “Our research shows that seven million people want Waitrose quality but can’t get it today where they live,” says Price.

Boots tie up

A tie up with Boots will give Waitrose access to hundreds of high street locations, potentially very quickly. The agreement will see Waitrose offer a selected range of food in Boots stores, in return Waitrose’s in-store pharmacy will be rebranded Boots.

New convenience

In the longer term, Waitrose are set to roll out their own convenience stores between 2,000 sq ft and 4,000 sq ft in size. Price is quoted as saying he hopes to open 300 stores over the next “five to ten years”.

New stores are expected to sell an edited range of mainly fresh food, providing customers with staples for top up, convenience shopping. In addition the company plans to increase the number of stores found at Welcome Break motorway service areas from two to eleven. A move that will help them gain exposure to middle England.

Double-digit growth

Price is positive that Waitrose can build momentum and continue to be the fastest growing grocery brand in the UK, “With continued strong performance from our existing stores and this move into the convenience market, we are planning for double-digit growth for the foreseeable future”.

UK high streets told to create unique identities to survive recession

The British Retail Consortium (BRC) have released a report urging UK high streets to be more distinctive to counteract slowing sales and reduced consumer spending.

The report, “21^st Century High Streets: A new vision for our town centres”, sets out a six point recovery plan for town centres and urges national and local government to work with retailers to ensure that retail failures do not bring down previously functioning high streets. The report shows a deeper level of thinking than government plans announced by (then) Communities Secretary Hazel Blears back in April.

“Tipping point” fast approaching

The report warns that a “tipping point” is approaching and immediate action is required. At the current rate, business failures and lack of new capital investment is likely to leave an even bigger hole in the high street. BRC estimate that the level of vacant premises will hit 15% by end of 2009, up from 7% in January.

Distinctiveness and identity

Central to the recovery plan is developing a sense of local identity on the high street, “The distinctiveness of many town and city centres is an asset, not an impediment. New developments can be complementary to existing features rather than seeking to homogenise surroundings.”

Place making

In addition the report highlights the importance of attracting customers, BRC suggest a more holistic approach combining retail, entertainment and cultural events that maintain local identity.  “Communication and marketing are key elements in developing an effective sense of place. People living within reasonable traveling distance need to be able to recognize and identify the essential nature of a high street.”

Most visible sign of recession

The high street provides the most obvious sign of recession. Shoppers unable to ignore increasing numbers of vacant units are likely to lose more confidence in the economy, accelerating decline. This downward spiral needs to be broken if high streets are to recover. For this to happen stakeholders need to work together to create a new vision for high streets across the country.

To read the full report click here.

Front-line banking staff delivering on customer satisfaction

Research shows that despite public anger leveled at the financial services sector, customer satisfaction with high street banks has actually risen. The UK Customer Satisfaction Index, shows that consumers rate the sector highly when asked to score professionalism, quality and efficiency, problem solving, speed of service, and ease of doing business.

Above average sector score

Based on 25,000 respondents, the banking sector as a whole scored 75.3% in the index, fourth out of a total of ten sectors. Top performing sector is tourism (79.1%), the lowest is utilities with 66.1%. Average score across the ten sectors is 74%, so banks are delivering above average customer service.

Jo Causen, chief executive of the Institute of Customer Services was quoted in the Times saying, “Even though there are challenges in the banking sector, people rate the customer service provided by front-line staff”. This point is proven best when looking at the score given to Royal Bank of Scotland, a bank that has had a desperate 6 months. Despite turmoil and the fact that their score has dropped slightly, RBS still score above average 75.9%.

“World class” service delivery

80% is the benchmark for “world class” service delivery, John Lewis topped the scoring with 90.9%, of other retailers Waitrose finished fourth overall (87.1%) and Marks & Spencer made the top ten with 84.5%. Co-operative Bank were best-bank, scoring a creditable 81.2%.

Increased profits and competitive advantage

The research confirms that companies that take customer service seriously can make a difference to the bottom line. The institute believe profits can be increased by as much as 24%, in addition firms are twice as likely to to retain staff and develop a customer base that is three times more likely to recommend their products and services.

Looking local

A major trend identified in the survey is the preference for all things local. Local plumbers outscore every bank with a satisfaction rating of 87.2%, local fish and chip shops score 86.9%, and local hairdressers score 86.1%.

The message to banks and major retail brands is clear, place the customer at the center of your business, treat them well and provide the personal approach.

Forward looking Virgin Media to triple store footprint with help of “stores without walls”

Coinciding with plans to expand their cable broadband, phone and TV network to cover 500,000 new homes and businesses across the UK, Virgin Media announce, as part of a three-year development program, plans to triple their number of outlets over next 12 months.

Recession good for “challengers”

Proving that recession creates opportunity for “challenger” brands, Virgin aim to take advantage of cheaper rents and landlord incentives on offer due to a slowing retail sector – market analyst, Experian forecast that retail vacancy could hit 15% by end of 2009. Stores are planned for the likes of London’s West End, Meadowhall in Sheffield, Victoria Centre in Nottingham and Ropewalk Shopping Centre in Nuneaton.

Showcasing the “digital home”

While Virgin Media products are available in 4,000 independents the brand currently have just 27 own-brand stores. Virgin’s aim is to create interactive formats (much like Apple) that will build brand awareness, grab market share and showcase their range of family entertainment products and services for the “digital home”. Managing Director of consumer retail Peter Taddep explains, “This expansion will reinforce Virgin Media’s presence at the heart of communities across the UK and provide a valuable contact point for existing and potential customers.”

Stores without walls?

Most intriguingly, as part of their growth strategy Virgin Media have developed a new retail format for prominent mall locations named “Retail Lite”. Virgin Media describe their formats as a “new retail experience”, and believe that they are “the most advanced customer facing outlets”.

Apparently designed along the lines of a permanent walk through installation, new formats will sell the same range of broadband and mobile phone packages as a traditional store.

Recession should = Innovation

The easy option for brands is to cut back in an economic slow down, instead, Virgin Media are focused on the opportunity. Their approach illustrates the importance of investment in innovation. Virgin Media are banking on improving market share and establishing themselves in the marketplace for when the (temporary) recession ends. They are looking forward, while other retailers are reining back.

“Trust” brands look to steal customers from high street banks

News this month highlights that recession creates opportunity on the high street for “trust” brands. Stefano Pessina, executive chairman and chief executive of Alliance Boots, owner of Boots the Chemist announced plans to split his role to focus on strategy, developing the Boots brand and increasing sales.

Brand development

Quoted in the FT, Pessina explained his reason for looking to develop and extend the brand, “We are in a market that is not growing by 20 per cent a year … and we have to add services; we have to be very active in order to offer more and more to customers and we have a lot of ideas. We are working on certain ideas.”

With Tesco planning to enter the financial services sector, speculation is, Boots will follow. Given the total breakdown in consumer confidence in the banking sector due to taxpayer bailouts, a culture of excess, and greed, consumer-centric retailers spot an opportunity to leverage the trust imbued within their brands.

Financial services loss of trust

Two recent surveys illustrate depth of problem for high street banks. Moodier Britain survey, published by McCann Erickson in November 08 (before extent of banking collapse was apparent), found that nearly 25% of respondents – total sample of 1028 adults – had no trust in banks.

More recently Readers Digest Trusted Brand Survey 2009 shows that across 16 European countries trust in banks has fallen 39% in 12 months, and 57% in the UK alone.

“Trust”, increasingly important in a down turn

It appears having no financial services experience is no longer a barrier to enter the sector. Banks have illustrated that expertise is no guarantee of expert performance. While Boots would be untested, they have demonstrated for decades that they can be trusted to look after the health of the family. These most simple values are set to challenge the current banking status quo as consumers turn their backs on organisations that appear to be uncaring and led by shareholder profit.

New players

In a recession “trust” will become more important as it guarantees loyalty and in turn sales. While banks try desperately to save their businesses and prove that they are no longer out of step with their consumers, new players are set to trial, improve, and then challenge their lofty position.

While there wasn’t a run on any UK banks, expect a run on their customers if the likes of Boots and Tesco decide to try and steal market share.

“Nouveau poor” breathe life in to value and discount retail

While the retail sector at large struggles as consumers keep cash and credit card in pocket, one retail segment is seeing an upside to the downturn.

Discount and value stores are experiencing a resurgence and older shopping centers with less fashionable and contemporary tenants are benefiting from courageous expansion plans.

This raises a question. While market conditions suit these plans, what happens when the market picks up?

Variety, the spice of life

The retailer that best opitimises this trend is “variety” retailer Wilkinson who have announced plans to open 200 stores – they currently total 295 – and triple sales by 2012.

Current market conditions and the decline of Woolworths provide the retailer with the perfect opportunity to improve market share and establish themselves as a major retail force. New neighbourhood stores are being trialed (see below) and ad spend is set to accelerate in 2009 in an attempt to build the brand and communicate their position as “The home for family value”.

Wilkinson 'neighbourhood' Nottingham

 Additional investment in Wilkinson Plus, their internet and catalogue business is also planned.

Discount turns high value

Poundland – stockist of 3000 products all sold at £1 each - plan to grow from 178 stores to potentially 600. Looking to benefit from retailers entering administration, they currently search for locations across shopping centres and high streets.

This buoyancy at the bottom end of the market is having a positive affect on older, dated shopping centres that aren’t positioned for affluent consumers. Commenting in the FT (14/4/09), Bill Oliver, chief executive of St Modwen said, “Our portfolio is mostly secondary quality but it is letting up incredible well”. The company that had four stores empty after the closure of Woolworths have already relet three with two going to Wilkinson and Poundland.

Elephant and Castle – owned by St Modwen and once planned for demolition – is also seeing improved rental prices as discount retailers battle to find space. Nick Symons of Savills comments, “There are some secondary retail schemes that have capitalised on the current climate by targeting discount/value retailers such as Primark, TK Maxx and Wilkinson.” Symons cites Mall in Southampton, Pentagon Centre in Chatham as winners.

Bargain hunting

Value Retail, owners of designer discount outlet centres including Bicester Village claim to be trading ahead of budget with like-for-like sales up 10% on last year. McArthurGlen’s designer outlets are also bucking the general retail trend, with sales in January up 10% compared to last year. 

Discounting in an upturn

While current conditions are favorable, the market will bounce back. This presents discount and value retailers with a dilemma, while there is a short term opportunity to grow market share and sales they need to prepare to remain relevant when consumer confidence and “aspiration” returns.

Retailers occupying this space could do worse than look at Primark, a low cost retailer with the ability to make customers feel that they are buying contemporary high spend fashion, not cheap and cheerful items of clothing. Latest financial results illustrate the effectiveness of the approach, sales at Primark rose 18% to £1.07 billion in the 24 weeks to 28th February.

Wilkinson also set an example by investing in their brand and outlets. Their peers and the shopping centres that host them need to follow suit. If they don’t they risk loosing customers as quickly as they attracted them.

Empty high streets create opportunities

This week is the deadline for retailers to pay next quarter rent; reports suggest a new wave of cash starved retailers could be forced to shut their doors as a result.

Increasingly desolate high streets are showing visible signs of decline. Experian’s retail consultancy predicts the number of empty shops across the UK will hit 135,000 by end of 2009 – a record rate of 15% of the total. Of those chains that have closed administrators are only selling off a fraction of their estate, leaving a glut of empty stores.

Opportunities

With landlords under pressure, leasing deals can be done. With room for more negotiation, fledgling retailers or brands with aspirations to trial the high street may decide current market conditions present an opportunity.

Charities are getting in on the act.  “C@ Walk”, a fashion retail brand run by animal charity PDSA recently opened its doors in Northampton. Irrespective of your thoughts on the branding and design, the store – stocked with new not second hand ladies fashion – proves that market conditions suit some.

C@ Walk by PDSA

Pop up

While pop up retailing isn’t new, they are usually premium or exclusive affairs; Tyler Brule’s “Monocle” and “Eco Shop” in Westbourne Grove are recent London examples. Product brands like Pepsi, with “Pepsi Proper” have used pop ups to create brand experiences in LA and New York, forcing people to reassess the brand, due mainly to the brands that they partner with.

Pepsi Proper poster

Executed correctly, pop ups provide the means to create an event and sell on the high street. Brand awareness can be created and loyalty generated without having to invest in full retail fit out, permanent staff and all other operational costs. At the same time brands can bask in the glory of bringing energy back to an increasingly gloomy sector.

All that remains to be seen is whether retail brands and brand owners are flexible enough in thinking to give it a try.