Tesco fine-tunes retailing strategy

UK retailing giant Tesco continues to fine-tune its retailing strategy, both on the store side and online.

As shown above, it recently announced the closing of Tesco Direct, the company's profitless e-commerce initiative for non-food products. (Tesco.com is the company's grocery website.) Fulfilment is costly, maintaining an online shopping platform is costly and the company saw no way to profit from this venture. Most likely, competition was also a factor, with Amazon and others offering so many of the same brand-name products that were sold on Tesco Direct's site.

Yet Tesco continues to invest in physical stores. It opened a new supermarket in Dublin that features eco-friendly features such as energy conservation systems and recycling facilities.

The Tesco Clubcard is a major competitive strength, enabling the retailer to communicate with loyal customers and personalise offers. And Tesco will need this strength as it faces the soon-to-merge Sainsbury/Asda combination.

Marketing consequences of merging Sainsbury's and ASDA

Walmart proposes to sell ASDA to Sainsbury's, creating a UK retailing giant that would increase efficiencies--and possibly intensify the supermarket price wars.

Sainsbury's would manage the new entity, with Walmart as a shareholder and partner.

One marketing consequence is the ability for the combined company to pay less for goods and services purchased in larger volume. This will, in turn, reduce costs and therefore allow for lower prices--a key element in this competitive industry.

So far, Sainsbury's says it will slash prices by 10% and will not be closing any stores after the merger is complete. UK regulators may require the sale of some stores to rivals, which would be another marketing consequence of the deal. The marketing environment for all UK retailers could change as a result.

Finally, how will consumers react? Will the merger change consumer behaviour? We'll have to wait and see.

Sainsbury's vs Domino's Pizza: Unexpected competition

When you think about competition, think not just about current rivals but also about potential rivals. Sainsbury's, for example, is testing a new pizza takeaway service that aims to add convenience during the busy holiday season. And this is the kind of unexpected competition that Domino's Pizza has to consider when writing a marketing plan and conducting SWOT analysis.

'By giving our customers the chance to pre-order personalised hot pizzas and pay at the counter, we are saving them time and giving them a great value takeaway experience', says a Sainsbury's exec.

To streamline the in-store preparation process, the grocery chain is initially offering only two sizes of pizza, with multiple toppings available, in three branches. Customers order in advance and then pick up in the store, paying at the pizza counter rather than joining the queue to pay. All in line with Sainsbury's strapline, live well for less.

Grocery retailers like Sainsbury's typically offer frozen pizza or ready-to-bake pizza, but it's not usual to sell made-to-order takeaway pizzas. Yet adding takeaway pizza makes sense because so many shoppers like to buy premade meals to eat at home. Will consumers get into the habit of buying pizza where they buy milk, juice and nappies?

Sainsbury's is popular on social media, with 1.6mm Facebook likes, 505k Twitter followers, 96k YouTube followers, 171k Instagram followers, and 39k Pinterest followers. Comments about the pizza trial on these social media sites will help Sainsbury's gauge interest, in addition to tallying sales.

UK legacy grocery retailers continue to evolve

Sainsbury strapline

As in the rest of the world, UK legacy retailers are buying specialised firms and sharpening their competitive positioning. 

Why? Changing consumer behaviour and evolving industry dynamics.

Nisa logo

With fierce price wars raging amongst UK grocery chains, and online competition growing, legacy retailers are looking for new marketing roads to customer loyalty and for supply chain efficiencies to help the bottom line. For example:

• Sainsbury is expected to buy Nisa convenience shops, a 'family' of 2,900 'independent grocers' that serve local neighbourhood shoppers.
• Tesco announced the acquisition of wholesale food firm Booker, a deal that is currently being evaluated by regulatory officials and may result in industry changes.

Meanwhile, US grocery retailers are responding to the news that Amazon has acquired Whole Foods Market, giving the online giant an instant brick-and-mortar distribution channel. In fact, UK and European grocery retailers may also be affected. And European deep-discount grocer Aldi is aggressively expanding across the US, adding to the pressure on legacy supermarkets--just as Lidl opens its US stores.

So grocery retailing is increasingly global even as the industry adjusts to low-price, no-frills competition and the growing popularity of online shopping via Amazon and others.

Who likes self-serve checkouts?

Not consumers, judging by the reactions received by many grocery chains. Sainsbury's recently introduced card-only self-serve checkouts, to streamline the process of paying and leaving the store in this age of often cashless transactions.

Instead, the new self-serve checkouts frustrated some of Sainsbury's shoppers, because the staffless tills don't allow for weighing of fresh merchandise or for shoppers who bring reusable sacks.

Lidl's staffless self-serve checkouts in Maldon aren't pleasing customers, either.

Of course shoppers want to complete transactions quickly and conveniently. One study found that customers dislike waiting, and will tolerate a queue time of only 6 minutes. Understanding consumer behaviour is important if retailers are to compete effectively and provide what shoppers want, in the way shoppers prefer to be served.

For retailers, however, self-serve checkouts mean lower costs. No doubt that's behind the trend toward more self service. Australia's Woolworths recently announced the installation of more self-serve checkouts at a number of its downtown locations.

Rival Coles is testing new limits to speed up self-serve transactions for the convenience of all. 'Coles is trialling a 12-item limit on self-scanning checkouts in a small number of stores as part of our ongoing commitment to improve customer service', the Australian retailer has announced. This may also be a way to combat shopper theft at self-serve checkouts.

Consumer behaviour and the 'big night in'

Marketers have identified a trend in recent years, based on evolving consumer behaviour such as saving money and making time for family. The trend is towards planning a 'big night in' instead of a traditional 'big night out'.

Rather than splashing out on a restaurant meal and cinema tickets, many consumers are making plans to enjoy food and entertainment at home. Pizza, anyone? New Year's Eve was a 'big night in' this year for consumers in Wales, research shows.

Targeting this occasion, Sainsbury's and other marketers, offer snacks, drinks and more. Above, Sainsbury's online store, with a 'big night in' page offering 'easy cook' meals, snack foods, DVDs and video on demand. Poundland wants to attract shoppers interested in snacks for a big night in, whether the entertainment is a movie or a sleepover.

'Big night in' is influencing multiple marketing elements. For example, snack products are increasingly packaged in larger sizes for family sharing. 'Generally, the packaging is bold and often piggy-backs a cinematic theme as families try to create a movie going experience without actually leaving home', says one packaging expert.


 

Same-day delivery: marketing battleground for retailers

Sainsbury's recently announced it would offer same-day delivery of groceries ordered by noon. This is one of the ways the supermarket giant is battling aggressive competition from Amazon and no-frills discounters like Aldi. Sainsbury's is also proceeding with its acquisition of Argos, which itself offers same-day delivery or collection of toys and other products.

Amazon is offering same-day grocery delivery in London (in partnership with Morrisons for certain private brands). Whether delivered by drone in the future, as shown above, or not, Amazon Fresh promises Prime members that orders placed before the cutoff time will be at the customer's door by evening.

Rivals Aldi and Lidl are feeling the challenge of Brexit's impact on currency fluctuations. Because both Aldi and Lidl source many products from EU suppliers, the UK stores have to deal with higher costs when the pound sterling is low--and higher costs cut into already thin profit margins. For Sainsbury's and other UK-based retailers, however, this may present an opportunity to press price war advantages.

Meanwhile, speedy delivery is a niche being explored by startups such as Convibo, which offers one-hour delivery of grocery orders from London retailers such as Whole Foods and Waitrose. How much demand exists for one-hour delivery, compared with same-day delivery, is unclear--but this startup is a good example of distribution in general and service in particular as key points of differentiation.

Private brands continue strong

Aldi's exclusive range of household cleaning products

Private brands -- such as the brands marketed by grocery chains and clothing retailers -- continue to be strong sellers, year after year. Even as the recession reverses course and growth returns, consumers have learned through experience that private brands often are excellent alternatives to manufacturers' brands. And of course private brands, generally priced lower than manufacturers' brands, represent the majority of products at deep-discount grocery giants such as Aldi and Lidl.

Consumers recognise that private brands can offer quality, not just value. Aldi's coffee recently was named the best in a taste test that included Starbucks, Costa and other well-known global brands. Marks & Spencer's private wine brands took home multiple medals at this year's international wine challenge, where a number of grocery chains were awarded medals.

The image and reputation of the marketing entity makes a difference in how its private brands are perceived. Sainsbury is launching its private brands in an online retail environment to reach consumers in China who are interested in the cachet and quality of foreign brands.

Private brands are increasingly a key point of differentiation in the intensely competitive grocery industry, where supermarkets are using price promotions to attract shoppers week by week. Because private brands generally have higher profit margins, they can help retailers compete on the basis of value and quality.

Market share and competition in UK grocery retailing

UK supermarkets are locked in an intense competitive battle that often focuses on price. According to Statista, Tesco maintains its market-share leadership with 28% of the UK market for groceries, followed by Asda, Sainsbury and Morrisons (12 weeks as of March 1, 2015). Aldi and Lidl are increasing their share as well, making the UK a highly competitive marketplace for all in the grocery industry.

Morrisons has just made a change in its marketing plan: It will replace many self-service tills for express checkout of small orders with tills operated by staff members. The change in strategy is due to negative customer feedback about using self-serve for a few items. Surveys show that customers enjoy conversing with staff and they want speedy checkout when shopping for only a few items.

The CEO says: 'These checkouts - and our very helpful staff - will offer a quick and personal service, helping to keep queues low and improving thousands of shopping trips'.

Price wars are still the most visible element in UK grocery retailing, but convenience and personalised service are also important to customers. Now Morrisons (and its rivals) will watch customer behaviour to see reaction.

Grocery retailing challenge: Competitors as stakeholders

Stakeholders (also known as publics) are groups such as community residents, media representatives, stockholders, financial analysts and others who have an interest in or some influence on marketing performance. Obviously, customers, employees, managers, suppliers, government regulators and others can directly influence a business and its performance, meaning they're particularly important stakeholders.

As I say in my texts and here on the blog, competitors must also be considered stakeholders, because every rival can, directly or indirectly, affect the performance of its competitors. This is particularly true in the grocery retailing industry, where activities such as price-match guarantees directly affect what competitors do.

Sainsbury's situation shows this in action. To be competitive, Sainsbury (with 1200 UK stores) has to offer good quality at good prices, as well as making sure its stores are the right size and in the most convenient locations for customers.

Its competitors are using price wars as a key element in their marketing plans--which puts the pressure on Sainsbury to cut prices, too.

Sainsbury recently complained that a Tesco matching price promotion unfairly compared some Sainsbury products with Tesco products. The high court disagreed. But taking this to court indicates that Sainsbury is concerned about the effects of Tesco's price policies.

In fact, Sainsbury just announced a major price-cut promotion of its own to fight back against what competitors like Tesco and Aldi are doing to attract customers and increase market share. Competitors are, as this shows, influencing Sainsbury's decisions and performance.

Seeking to analyse its strengths, weaknesses, threats and opportunities, Sainsbury has revealed that up to 25% of its stores are either the wrong size or not in the right location. That presents a challenge because of the company's real estate commitments. Can Sainsbury improve its financial position, fix its store situation, keep prices low and improve profits? Stay tuned.

Supermarket shopping expands on Boxing Day

In today's multichannel world, shoppers can click to buy online or via mobile or on a tablet computer. They can use QR codes or UPC codes or browse virtual products. In short, store shopping isn't the only way to buy.

Yet some supermarkets are already announcing that they'll open more stores on Boxing Day, accelerating a trend that began after the turn of the century (this century!).

Back in 2007, Asda opened NO stores on Boxing Day, while rival Tesco opened a few dozen of its supermarkets. Fast-forward to 2010, when Asda opened 105 of its stores, Tesco opened 410 supermarkets and Sainsbury opened 236 stores.

For 2013, Morrisons will be opening grocery stores on Boxing Day--a first for that chain--while Asda, Sainsbury and Tesco will continue adding to the number of stores they open. Given the slow pace of economic recovery and the intense competition for shoppers, this isn't surprising. A Morrisons manager explains: 'We believe these opening hours mean customers will come to us rather than a competitor'. . .

Supermarket competition is especially intense because, according to a Payments Council study, 58p of every pound spent at a retailer goes to a UK supermarket. Those pence add up, and every grocery chain wants to get their share.

Two more factors are driving these Boxing Day openings: Bargain hunters are shopping at giant deep-discounters such as Aldi and more shoppers are seeking convenience. So even though grocery purchases are forecast to rise in the coming years, supermarkets will be fighting to hold onto their store shoppers every day, including Boxing Day.

Will UK audiences tune into product placement?

From February 2011, marketers have been allowed to pay for having their products or brands prominently featured within certain types of UK TV programmes. Programmes that include placements must be accompanied by a P shown on screen for three seconds at the start and end.

During the first year that placements were allowed, some industry experts watched for rapid growth in this marketing activity--yet fewer than 20 deals were noted by Ofcom, which regulates placement in the UK. During the second year, some high-profile deals like the Samsung placements on X Factor brought this technique more attention and some negative feedback as well.

Looking ahead, KPMG still expects rapid growth in product placement revenues. MediaVest's Rupert Britton also sees growth in the coming years. On the other hand, David Charlesworth of MirriAd says few marketers have plans for paid product placement right now.

Sainsbury's has a fresh take on this technique, cooking up live TV content that combines multiple placements within the traditional cooking programme format.  

What's Cooking from the Sainsbury's Kitchen features guest cooks and includes views of store-branded food and appliance products that relate to the menus (with recipes available for downloading from Channel 4 and from the Sainsbury's 'Live well for less' site). For the mobile minded, Sainsbury's has a free app, too, offering access to recipes, discounts and more.

Will product placement be more visible in the next year or two? Will it generate sales for the featured products and brands?

PS: This is my 400th blog entry!

Supermarket fashion: Morrisons joins the trend

Shop for tops and socks where you buy tomatoes and soups? Yes, the market for clothing sold in supermarkets is expanding, year by year, both in stores and online.

Morrisons has just announced its plan for the Nutmeg brand of children's clothing. Clothing director Tim Bettley explains: 'Customers tell us that they want a range which is fashionable but hard-wearing. We’ll also meet their need for simpler clothing that they can pick up as they do their food shop'.

Created by George Davies of 'Next' fame, George has given Asda momentum in building a nationally-known apparel brand with wide appeal and significant revenue opportunity. George's Facebook page (more than 95,000 likes) features the latest fashions and promotions.

Tesco's F&F fashion brand is also on Facebook (nearly 212,000 likes), with a virtual fitting room and savings vouchers plus, of course, photos of current fashions. The retailer opened Jubilee-themed F&F pop-up shops earlier in the year in busy London areas such as Covent Garden, complete with augmented reality fitting-room technology.

Sainsbury offered its range of Tu clothing in stores only for the brand's first 8 years. Now the retailer will be putting Tu online, just in time for year-end holiday shopping. Collections designed by Gok Wan (above) have helped Sainsbury boost sales and compete against its retail rivals.

Marketing with a larger purpose

What are your values--and are they integrated into your marketing?

Sainsbury's ad

Cilla Snowball, chair of the Advertising Association (and on the board of Comic Relief), recently told an audience of advertisers that 'purpose, values and consistency' are three key principles for showing how a brand makes a difference: 

'Consumers want to connect with brands that have a purpose and if that’s at large in your TV ads and expressed in a number of other ways you’ll do better than brands that don’t'.

Snowball, chief executive of the agency that handles Sainsbury's advertising, mentions the store's strapline 'Our values make us different' as a good example of integrating purpose into the marketing message and the organisation's operations.

Other UK retailers are also very active in purpose-led marketing. Marks & Spencer's Plan A has set ambitious goals for going green in merchandising, production, operations and almost every other function. M&S recently introduced the world's most sustainable men's suit. It's the result of a complex and sustainable supply chain created with the purpose of developing a product that satisfies customers' needs and protects the environment.

John Lewis is another retailer known for strong values that guide its decisions. From the employee ownership model to the green transportation initiatives, ethical sourcing and use of alternative fuels, John Lewis incorporates purpose into its daily operations and marketing. Long after the latest fashions fade, values will endure and remain important to customers as they make decisions in the marketplace.

Why so much blogging about Tesco and Asda?

Tesco, Asda, Sainsbury, Dixons and other national/international giants are popular subjects of blog entries and textbook case studies. Why do I continue to blog about these kinds of firms?

Reason #1: They're doing interesting things with their marketing strategy and tactics. Being big, they have the resources and capabilities to try new marketing ideas, analyse the results in an objective way and then decide what works and what doesn't. When something new succeeds big, it's big news. When something big isn't successful, that's also big news.

Reason #2: These companies are constantly being covered by the media, so it's easy to find out what they're doing and link to multiple reports about their marketing activities. Also, being public companies, they tell their investors a lot about their marketing, which means readers (and lecturers) can dig deeper to learn even more about what a particular firm is doing.

Reason #3: You know who they are. I always like writing about smaller marketers, because they have a lot at stake when they make a marketing decision, and some may very well grow up to become the Dixons of the future. But to show marketing concepts and theories in action, it's also good to base some case studies and write-ups on businesses that readers know or are customers of.

Of course, I also blog about global marketing firms that are in the public eye, such as Walmart, Nestle, Kraft, Danone, Samsung, Lenovo and more. These, like the Tescos and Asdas of the world, are market leaders and their marketing makes a difference locally and internationally.

Sainsbury thinks small

Now that Sainsbury is 140 years old, it's thinking small--as in expanding the number of small convenience shops it operates. The idea is to get shoppers in and out quickly when they need to pick up a few items on their way to do other things. Competitors are having success with convenience shops and Sainsbury sees room for more growth in this sector of the retail market.

Given the price of petrol, shoppers are watching their wallets and seeking out bargains wherever possible. Sainsbury's "coupons at till" programme offers targeted discounts, a plus for cost-conscious shoppers. Also, Sainsbury is emphasising its fresh foods and convenient locations in its marketing.

And, like competitors, Sainsbury offers online grocery shopping for consumers who prefer to buy with a click. Its online store is tying in with "football fever" by offering special buys for fan parties in the coming weeks. Stock up on crisps and soft drinks!

Asda vs Tesco and Sainsbury

Asda just announced ambitious plans to become the UK's largest retailer of non-food merchandise by 2015--which means a head-to-head fight with Tesco.

Asda also aims to become the UK's second-largest food retailer by 2015, setting off a food fight with the grocery giant Sainsbury.

Such market-share predictions can be risky but also an inspiring challenge internally. The Telegraph reported in 2008 that Tesco aimed to overtake Carrefour as the world's #2 retailer by the end of 2012. So far, Carrefour has maintained its position (behind the global #1 retailer, Asda parent Walmart), with two years to go before the 2012 deadline approaches.

Of course, when retailers use market share as a metric for measuring performance, they're hoping for significant change in competitive positions. Now that the economic slowdown seems to be finally nearing an end, these retail giants may be in a better position to do something about achieving the market-share changes they're aiming for.