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Analysis of the UK’s £32 billion and fast growing convenience market by Ed Garner of KantarWorldpanel shows that fresh and chilled is where Tesco Express is putting its emphasis.
Speaking just after him at Sweet Charity’s Independent Retailer Conference, Chris Etherington, chief executive of wholesaler Palmer and Harvey, said that fresh was nowhere near as high as it should be on the agenda of the independent trade.
A reason for this is that the wholesale industry is not as good at delivering this as it should be. The major multiples are very good at it. We need to get better, Mr Etherington said.
In a speech that was otherwise optimistic about the growth prospects for local shops, this was an important caveat. Mr Etherington, who heads the UK’s largest wholesaler by sales, says that the market will grow. “It is a great, great opportunity and it’s the shoppers that are doing it,” he said.
But how soon can the wholesalers get it right? This week’s news from Tesco that it was employing a further 20,000 staff in the UK and they would be employed in the fresh produce department so that it is kept looking appealing and well-replenished through the day suggests there is not much time.
However, look deeper and local retailers can still think about the competitive opportunity. One blogger, ukretailers, suggests that staff shortages over the past two years are causing serious problems for Tesco and this move may not turn it around.
In his briefing to the FT, Richard Brasher, chief executive of Tesco UK, said the need was to keep the stores full of stock, well presented and to have staff available to help shoppers. So when Tesco tells investors that it has pushed down too hard on costs for too long, to the point where customers began to notice, this means that it recognises that it is not getting enough out of its competitive advantage.
Clive Black, the influential City analyst, told the FT that if you get fresh wrong it does not matter what the rest of the store is like because people will not go through your door.
This is probably more of a challenge for local independent stores than it is for Tesco. We know that nine out of 10 shoppers still visit Tesco regularly because Mr Garner’s data shows they do.
There is a big decision for local retailers. Some will take the plunge and develop their fresh offer. In doing so, they will be competiting with the supermarkets’ local format stores. The evidence is that they can win and they will be hoping that investment by wholesalers in better fresh and chilled products will gain enough traction so they can compete with £10 meal deals and the like from the multiples.
For these retailers, it is good to pay attention to the strategy developments of the multiples as you have to differentiate your shop to be better than them.
For other local shopkeepers, the supermarkets focus on fresh may present an opportunity to differentiate in a different direction – selling what the supermarkets don’t sell. For you one danger is that supermarkets choose to use your core product as a loss leader to attract customers.
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