Thursday, 23 February 2012

Co-op Wield The Axe

It's always sad to see fellow retailers facing redundancy, especially in times like these and my sincere best wishes go to those at the Co-op who received the wrong kinds of letters in Manchester today.

Mass redundancies can leave long lasting scars on businesses - I joined Asda less than 6 months after their 2005 "cull" and emotions were still raw. For some, they were still haunted by that dark day when I left 5 years later. You can't help feel that today's cuts were inevitable following the merger with Somerfield. My understanding is that there were still senior managers travelling between Bristol and Manchester which can hardly have helped the two groups of workers bond. But while a restructure was overdue, there are two key issues that I don't believe the Co-op has resolved yet - Range Complexity and Store Compliance.

There's no denying that Co-op has an incredibly diverse portfolio of stores. Their capping on square footage has put the brakes on format proliferation but they still have a phenomenal array of ranging routes for their stores. I've heard of a category with around 500 different planograms to cover the estate. I'm all for targeting ranges to local needs, but how do you ensure that every plan is accurate and consistent? And just how much does a small range in their core size c-stored need to vary? My experience is that only shopper mission makes a massive difference to the core range - shoppers of all pockets still buy Heinz Baked Beans and Walkers Ready Salted Crisps.

Another problem with this strategy is that unless you have a stable period with a base range in your estate, you have no robust sales data on which to make decisions about which products matter more to different shopper groups. Without good data, you're left with retailer hunch - a valuable input to any good range selection process, but dangerous as the primary or sole driver.

With so many senior changes at the Co-op coupled with disappointing sales, you'd expect strategy to be reviewed. Steve Murrells brings a huge pedigree with him when he joins from Tulip later in the year. He was highly regarded at Tesco and his CV would seem to make him perfect for the business. Hopefully, he will bring some of the old Tesco simplicity to their ranging processes and, perhaps make life a little easier for his merchandisers!

I'm certain that complexity at the centre doesn't help the stores, and it shows. Most Co-ops I visit are consistent only in being huge disappointments once I go through the door. Their branding is superb, externally they look amazing in the bright green livery, but once you go inside, it might as well be my old local Chelmsford Star from 30 years ago. There are some exceptions, notably Marple which I visited earlier in the week. When the store team genuinely care about their store and put the effort in, the branding comes alive and creates a wonderful store environment.

However, some of the stores I've visited are inhabited by staff who have no passion for their stores. I wonder sometimes if Co-op suffer from the same problem as Asda do with their stores and try too hard to be a "happy place" to work - if you don't stretch and challenge your store staff enough, some will take advantage. Sad, but true!

I appreciate that the systems aren't as slick as other retailers, but that's no real excuse. Good retailers deal with what they have to hand and cherish their stores. Untidy, poorly merchandised and basically scruffy shops that seem totally at odds with the slick branding and marketing. They don't appear to be good with anything, let alone good with food. This lack of consistent execution in the stores is inextricably linked to the first issue and reaffirms my belief that what Co-op need first and foremost is a much simplified ranging strategy to establish firm foundations for the next 5-10 years. If this was coupled with much improved store training that taught their stores had to be great traders, then credible local decisions could be made without the need for hundreds of centrally-driven variations to range.

Co-op does have a lot going for it - strong brand equity, great store locations, good store models. They now need to knuckle down to becoming operationally slicker. If they can achieve this, and do it during a downturn, they stand a big chance of becoming a true major player in the UK retail environment in the future. Good lucky to them, and even more luck to those who sadly won't be able to make the journey with them after today.

1 comment:

  1. Interesting. Living near London in an area the Co Op had given up on my nearest store is a fully refurbished ex Somerfield. I was dreading the Co Op taking over but its been an improvement and beats the nearby Tesco Express and recently opened Sainsburys Local hands down for range, quality and store standards. As an ex Alldays manager who saw how the Co Op destroyed and then closed previously profitable stores I’ve been impressed.

    What really surprised me on holiday recently was seeing original Co Op estate stores which had been converted to the new brand but with minimal work being carried out inside. I can’t understand why they would choose to de-value the brand like that.

    I think the biggest mistake they are making is the same as Somerfield and not supporting large stores with a wide enough range, especially in fresh, or low enough prices. It’s a policy which turns what should be busy supermarkets into large convenience stores. It’s surely an embarrassment for TCG that several of the remaining regional Co Ops manage to more successfully trade from large stores.

    Having said all that I think it’s easy to forget just how much they have improved in the last 5 years from being virtually a retail graveyard. Great strides have been made in availability, branding and product quality and if that carries on they should have a bright future.