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Costcutter retailers that follow their group’s RRPs and sell one case per week of the 398 key lines analysed by RN will make £12,326 less gross profit per year than Nisa stores doing the same.
While the product, packaging and ranging may be identical in the two symbol groups, data from their retailer guides shows differences in wholesale and recommended retail pricing in nearly every major product category.
RN has analysed just under 20% of the range available to independent retailers. These products include big sellers like milk, cheeses, confectionery, ready meals and fruit & vegetables, as well as niche products, like Co-op French Baking Camembert and Free From Spaghetti. The results do not include any rebates or surcharges incurred by retailers from either symbol group.
Nearly a quarter of the products analysed fall into the canned & packaged grocery category, which contains bakery products, tins, bags of pasta and rice, and sauces. Meals for tonight and fruit & veg are the second and third largest categories in terms of number of products.
Overall, Nisa retailers can make 5.6% higher gross profit, with categories such as dairy and bakery generating 29.3% and 19% higher margin than Costcutter stores respectively. Biscuits and confectionery, a core category for convenience retailers, also has a margin difference of 19%.
Out of the 13 categories analysed, Costcutter retailers had higher margins in just one area: frozen – the smallest category analysed.
Own-label household is the biggest margin booster for both retailers, with Nisa retailers achieving margins of 49.9% and Costcutter at 47.8%.
“It’s not surprising that Nisa retailers are getting better terms. The company is partly owned by Co-op, whereas Costcutter only has a supply deal with them. It makes sense that they’d get more favourable terms because of the nature of both agreements,” says wholesale expert David Gilroy, founder of Store Excel.
“But what if you have a Nisa and Costcutter on the same street competing with each other? The store with the cheaper overall basket will win out. Customers will eventually work out that they can get the same basket from another store for cheaper.”
The margin differential is made possible with up to 1% lower wholesale prices (WSP) for Nisa retailers overall, but 2% higher RRPs. At RRP, this does make Costcutter cheaper than Nisa stores on 146 lines, but it is possible this could result in lost margin if customers are willing to pay the higher RRPs.
The basket comparison below shows the margin and price differential on a random basket of key products. It includes three top-up items (bread, milk, fruit) and four big night in items (soft drink, snack, wine and meal for tonight). By selling just these seven products, Nisa retailers will make 95p more than Costcutter stores – which almost entirely comes from a higher retail price rather than a lower wholesale price.
A comparison of shelf life across the 398 products showed Nisa and Costcutter retailers are receiving a similar level of service. All but 14 lines had the same shelf life, with Costcutter and Nisa stores receiving seven longer-lasting products each.
A Costcutter retailer will have eight extra days to shift Co-op Red Leicester while Nisa retailers can keep Co-op Irresistible Cheddar & Onion Crisps out for 17 more days. These were the products with the two biggest differences.
A spokesperson for Costcutter Supermarkets Group responded: “We price competitively within the marketplace, and the simplified pricing structure we introduced last May means our retailers easily understand their margins all of which is then supported by a rebate of up to 6%. For our Co-op Own Brand range, we deliver a 30% blended margin across the range with some excellent star lines.”
A Nisa spokesperson told RN: “Our partners know that when comparing margin on products, they need to view the margin opportunity across a whole basket of products and not on individual items. In addition, Nisa’s independent partners benefit from more than just strong margins on a leading own label offer, our excellent availability, rewarding rebates and first rate retail advice and consumer insights are all part of Nisa membership.”