With figures from grocery industry analyst IGD suggesting that symbol group stores could outnumber their unaffiliated counterparts within a few years, RN spoke to two leading fascia bosses to get their thoughts on the future of the market.
With consumer spend in the convenience channel on track to hit £49bn a year by 2019, the number of symbol groups has grown by 2.8% to 17,080 in the last year and they now account for £4.20 of every £10 spent.
Indie stores operating without a fascia, however, fell by 1% to 18,630.
James Hall, director of symbol at Bestway, and Nigel Gray, Nisa business unit director for symbol, shared their thoughts.
Retail Newsagent Why do more retailers seem to be joining symbols?
James Hall There is more competition on the high street than ever before. We have discounters appearing, convenience multiples developing their estates, more and more symbol operators increasing store numbers. This makes it extremely difficult for independents to compete. As competition intensifies, retailers need to expand their offering. Being part of a symbol means that they can get great chilled and frozen products, fresh produce and food to go solutions which have not always been the forte of cash and carrys – their traditional supply route.
Nigel Gray Retailers are joining symbol groups for a number of reasons but primarily because it allows then to become part of a strong brand that customers recognise with a clear support structure attached to it. In the very competitive convenience market place that we are trading in, a retailer wants to be sure that they can leverage the maximum commercial advantage for their business. Nisa is a trusted operational model and brand that can do that for them whilst still allowing them the “space and freedom” to maintain their own local identity.
RN What does your group offer which is compelling to independents?
JH Best-one is a nationally recognised chain of stores which gives shoppers confidence in the store. In addition to a comprehensive range of ambient, chilled, frozen and licensed plus fantastic promotional offers every month with accompanying point of sale, Best-one offers the independent total flexibility. Best-one retailers also benefit from My Rewards – the most generous rebate scheme in the industry where they can earn up to 5% rebate on their purchases. A good symbol group is about much more than simply fascia and promotions. It’s about investing in its members to help them better meet evolving consumer needs for shopping little and often. To this end we have a network of over 50 business development executives who work with Best-one retailers to ensure that they are well-informed of the latest development in terms of category management, NPD, legislation and store development.
NG The Nisa model is a very flexible model as it allows retailers to drive “local” benefit through their own well established and locally recognised brand whilst at the same time, realising the benefits that come from being part of a large business development and support organization that provides marketing, customer communication, trading and IT expertise as well as efficiencies which come from the scale of the Nisa business.
RN How important has the development of smaller formats been in symbol group growth?
JH Smaller formats have helped multiples gain a foothold in convenience. Consumers no longer want to go to superstores and stock up only to throw out outdated stock at the end of the week. Promotions only work if they have value. What’s the point in paying an additional £1 for two yogurt multipacks if you are only going to get through one pack and throw the other in the bin? You’ve not made a saving; you’ve just wasted £1. Consumers are shopping locally more than ever before which is great for those stores that are part of a symbol and are welcoming. Good symbol stores should be able to beat the multiple retailers on overall basket spends as the convenience multiples only offer deals on a fraction of the range – the remainder is above what symbols are selling at, particularly with the continued success of pricemarked packs.
NG Smaller formats are an integral part of the Nisa model. As I have already highlighted, one of the strengths of Nisa is that it is able to service and support retailers that are both small and large in terms of either sales or turnover. We pride ourselves on the service level that we achieve from our warehouse as well as the breadth of the product range and promotional package that comes with that range, alongside the marketing toolkit that supports overall customer engagement. These are all things that the small format retailer can benefit from when they work with Nisa.
[pull_quote_right]There will always be independents who will forever want to trade under their own name and see joining a symbol group like Best-one as a dilution of their business. More and more retailers are migrating towards symbols because they offer things that most retailers cannot achieve on their own – James Hall, Bestway[/pull_quote_right]
RN Is there a ceiling for the proportion of retailers who are part of a symbol group?
JH Yes, however I don’t know what that is. What I do know is that there will always be independents who will forever want to trade under their own name and see joining a symbol group like Best-one as a dilution of their business. However, unless they are a tremendous operator or a specialist store, the writing will be on the wall for them. More and more retailers are migrating towards symbols because they offer things that most retailers cannot achieve on their own.
NG I do not believe that there is a ceiling to the number of retailers that can be part of a symbol group however there can clearly be challenges around proximity trading should a marketplace become saturated. The fact that Nisa is able to offer a tried and trusted model for retailers, be they independent, specialist and/or symbol means that we are able to service and support a significant segment of the convenience marketplace whilst avoiding that challenge.
RN Do you expect symbol group members to outnumber unaffiliated indies in the next few years?
JH All the growth statistics do appear to suggest that. There are some symbols like Best-one which are experiencing double digit growth year on year while others are plateauing. The good news is that the decline in independents seems to have eased off with the majority of those leaving the unaffiliated channel being absorbed into symbol rather than closing down. One thing is for sure, symbols will overtake unaffiliateds in the long run. Whether that is in the next two, five or ten years will depend on the willingness of unaffiliateds to embrace the symbol offering.
NG There is always a place for independent retailers who have established strong brands that are recognised within their local trading environments and that have clear points of difference; in fact these retailers can deliver best practice to the rest of the industry. That said, as the multiples become more and more prevalent in both number and format, so the challenges for the unaffiliated Independent become greater and hence the benefit of becoming part of the Nisa model are more and more relevant.
RN What are the challenges for those who stay unaffiliated?
JH Competing on a level playing field and becoming more disciplined. They need to focus on people rather than percentages. By this I mean that the shopper is the most important person to the success of the business. Offering what they want, when they want it with a good value proposition makes business sense. Chasing percentage margin by overpricing or by not offering promotions to customers is futile as they will lose out to the competition. For those who want to retain independence, Bestway and Batleys operate the Xtra Local retail club which has over 2,800 retailers across the UK. These retailers have chosen to shop at Cash and Carry and not be part of a symbol group. However the group does support them by offering deals, consumer promotions and point of sale to help compete.
[pull_quote_right]There is always a place for independent retailers who have established strong brands that are recognised within their local trading environments and that have clear points of difference; in fact these retailers can deliver best practice to the rest of the industry – Nigel Gray, Nisa[/pull_quote_right]
NG The challenge for the unaffiliated independent retailer is being clear about, and then maintaining, their point of difference and continually communicating that point of difference to their customer base in the increasingly competitive marketplace where price is being pushed as the be all and end all. Where huge marketing budgets are being used to tell customers how cheap the multiples and/or the budget retailers are, so the independent retailer has to play to their strengths of value, local, standards, innovation, service and being part of the community.
RN How will you help members to stay ahead of multiple convenience operators during 2014 and beyond?
JH We will continue to do the same: invest in people to work with our members, devise strategies such as My Rewards which add real value to their business, bring them offers which often beat those in the multiple convenience stores and offer a more comprehensive chilled and fresh offer. We want to put our members at the heart of their community and be the local store of choice. For example, in 2014, for the first time ever, we are launching a consumer text to win competition through Best-one stores as part of our World Cup promotional campaign and we have started supporting retailers with local press advertising which is driving shoppers into store.
NG As we develop our customer insight capability we are becoming much more targeted in our promotional package and the methods that we use in order to communicate that package and our brand strengths to the consumer. The information that we have and the way that we use it within the development of our brand and category propositions means that we a can offer much more customer driven solutions to our retailers be they independent, specialist or as part of the symbol group. We have a support team that is both field and office based which works with retailers to ensure that they are developing their businesses commercially and that ensures they are both aware of and are therefore able to use all of the tools that Nisa has to offer in order for the retailer to stay ahead of the competition.