When I was visiting London last month, I got stopped on the Millenium Bridge by a German TV News crew who asked the question “what are you looking forward to most in 2012?”. My answer was simple – 2013.
There’s no question that 2012 will be tougher than 2011. For all the hype about cuts last year, many only started taking affect halfway through and many more will hit us this year. There’s also a lag in consumers reigning in their spending. I feel the penny may have dropped at last that those credit card bills do actually need more than the minimum payment.
An even higher percentage of “leisure” time will be spent in supermarkets this year and a higher proportion of disposable income will be spent on food and drink. The paradox of this is that those above average household incomes will possibly be spending more on grocery than last year, irrespective of inflation.
So how will the mults react? Tesco and Asda seem obsessed with price, even more than their customers at the moment. You can understand it with Asda as it has long been their only lever and hard-coded into their DNA. But with Tesco, they seem to have forgotten what made them the behemoth they are now. During the 1990’s, they invested in price AND shops – now their shops are increasingly looking tired and unloved. Pictures are flying around twitter of items with the wrong coloured shelf-edge labels and even a complete lack of them – a surefire sign of store cuts biting.
Tesco will also face mixed impacts from their formats – Extras will surely struggle with non-food space returns falling but Metro and Express will both benefit from shoppers switching to top-up shopping and shorter journeys in their cars. Asda also claim to have formats, but the Supermarket format lacks a crucial element that Metro has – good location. Shoppers who prefer smaller stores tend to arrive by foot or public transport – much of the Netto estate was on retail parks and other cheap rent locations and not really set-up for this. I await the next set of Kantar data with interest as Andy Clarke’s assertion that Asda can now “do small stores” looks increasingly similar to George Bush’s declaration of victory in Iraq 8 years ago.
I personally can’t understand Sainsbury’s at the moment. I genuinely felt this time last year that were well placed to take the number 2 food spot away from Asda but it never quite materialised. Certainly the refit and opening programme is creating some stunning looking stores which invest a lot of space to the shopper, there’s still a slight issue convincing the crucial mid-market shoppers that they can get their full shop there. JS have incredibly strict shelf inventory rules which make it harder for them to offer breadth of range compared to their competitors. This will probably hamper their ability retain big trolley shoppers until a solution can be found. There could be an element of slow burn with JS though and I start the year in the same way I did last year, expecting them to get good growth and at the very least make the good folk of Leeds a tad nervous.
No such problem at Waitrose though – they suffer no problem with squeezing in range in their increasingly ambitious looking shops. They’ve also got the “buzz” around them amongst shoppers – a kind of aspiration that used to be reserved for M&S food before it appeared everywhere with Simply Food. They will have some big sales numbers to lap from last year which might point to a slight slow-down in their growth. Online will certainly help, and the early figures from them suggest a cracking Christmas period. There’s a good chunk of Ocado business they will pick-up as the early teething problems become a distant memory while the snobbier amongst us will surely look forward to a nice looking Waitrose van parking up outside the house to wind-up the neighbours.
Morrisons had an amazing year last year and I fully expect that to continue. They seem to have a great balance at the moment, with shoppers seeing them as cheap without such over t marketing as Asda and Tesco. Although a large proportion of their estate still looks dated and reminds me of my old Tesco in the early 1990’s, they’ve shown with their store development programme that they understand what the modern shopper wants from a store. Plus in M Local, they have a unique take on convenience which I think will work well, especially when they get brave and tackle the London shopper antipathy that has surrounded the brand since they took over the Londoner’s beloved Safeways.
Finally onto the Co-operative. They have marketing sewn up, even finding the only accent in the world that can rhyme “Good” with “Food”, and my experiences with them suggest there are a lot of great ideas and projects coming out of HQ. But, and it’s a big but, this just isn’t showing up in their stores yet. Their showpiece city centre new stores are great, but the vast majority of their estate is dated, messy, badly laid out and generally a poor experience. The business needs to be dragged kicking and screaming into the modern age, something that can be done without losing the ethical and community USP. The business needs to be brave and accept 2 or 3 years of pain and poor growth. But I’m confident that if they hold their nerve, there’s a cracking business there.
2012 will be incredibly tough for everyone, but I’ve personally never ducked a challenge. There will be a lot of whinging and bad decisions made over the next 12 months, but good businesses will always survive tough times.
See you on the other side!